A Game Theoretic Model of Monitoring and Compliance in Fishery Cooperatives

Suggested Bibliographic Reference: Challenging New Frontiers in the Global Seafood Sector: Proceedings of the Eighteenth Biennial Conference of the International Institute of Fisheries Economics and Trade, July 11-15, 2016. Compiled by Stefani J. Evers and Ann L. Shriver. International Institute of Fisheries Economics and Trade (IIFET), Corvallis, 2016.Proceedings of the Eighteenth Biennial Conference of the International Institute of Fisheries Economics and Trade, held July 11-15, 2016 at Aberdeen Exhibition and Conference Center (AECC), Aberdeen, Scotland, UK.Granting catch shares to cooperatives is a fisheries management option that has been widely applied. Although fishery cooperatives systems around the world are structured in various ways, it appears that most share the characteristic that members of the same cooperative are jointly and severally liable for not exceeding collectively assigned fishing rights, and sometimes for other violations too. This paper analyzes how the incentives to comply may be different for an individual fisherman operating in a fishery cooperative where joint and several liability applies as compared to an individual fishing quota baseline situation where there is no fishery cooperative structure. Indeed, fishery cooperatives typically have their own internal compliance regime that includes monitoring and penalties. We formalize alternative monitoring-penalty mechanisms and develop a game theoretic model. The model first focuses on the expected gains and losses associated with the compliance/violation decision to derive the conditions under which a cooperative structure increases compliance according to the traditional economic incentives. Second, we add a social preference model to represent the social capital in fishery cooperatives and show that social factors can in fact magnify the effect of the standard economics incentives. The analytical results, establishing whether and how cooperative systems may be a means of improving compliance and reducing the monitoring costs for the regulator, are complemented by an analysis of the commonalities and differences in the way compliance regimes are actually structured in a number of contracts and agreements from fishery cooperatives in the US and in the EU