Estimating the Costs of Quota Share Trading Restrictions in the Alaskan Halibut ITQ Program Using Linear Programming

PresentationRights-based fisheries management programs allocate to fishermen a specified portion of the annual TAC, providing fishermen with the incentive to optimize the value of this share, which has been shown to lead to more economically efficient behavior. Less efficient operators will tend to leave the fishery, decreasing overcapacity, but this exodus can have negative socioeconomic impacts, especially on isolated coastal communities. Managers often seek to minimize these adverse impacts by implementing community protection measures, which, in turn, restrict the ability of shareholders to optimize the value of their shares, thus reducing the economic efficiency gains possible with unrestricted privileges. Although such measures are common throughout rights-based management programs, there is relatively little literature on their costs and benefits. This study addresses this critical gap by assessing the costs of restrictions in the Alaskan Halibut ITQ program, including individual and vessel use caps and the categorization, and prohibition on inter-category trading, of quota shares. Linear programming (LP) is applied to estimate the costs, in lost potential economic rent, of these regulatory restrictions, from 2007 to 2011. Quota share trade restrictions and use caps are simulated as constraints in the LP models, with the maximized objective function representing the rent generation possible under loosened regulations. The results of this study indicate that rents in the halibut ITQ fishery could increase by as much as 28% if biological restrictions on inter-area trades were loosened, or 8% if social restrictions on inter-class trades were loosened, with use caps constraining these potential gains