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Credible enforcement policies: The role of ITQs in marine social-ecological systems

José María Da Rocha, Sebastian Villasante, Rafael Trelles González. 2012.

Abstract:

Individual transferable quotas (ITQs) have shown themselves to be fairly effective in generating economic rents in fisheries. This paper shows how the introduction of ITQs can alter agencies’ incentives to deviate when time consistency problem exists. Formally, we show that the introduction of ITQs increases agencies’ potential benefits of deviating and therefore making difficult building up a reputation. In a one period economy, the government incentive to deviate fishing quotas is motivated by the fact that the collection of fines will only have a negative effect on fishermen’s welfare and no effects on fishermen’s harvest choices. Under this scenario, the introduction of ITQs reduces the welfare outcome associated with Nash equilibrium. In infinitively repeated economies, we study the set of possible values that the enforcement agency can attain with reputations, that is, the set of all credible enforcement policies. With the introduction of ITQs, the best subgame perfect equilibrium with ITQs is always worse than the best subgame perfect equilibrium without ITQs. Finally, we found a numerical example for which without ITQs it is possible to build a reputation by using worse continuation values than Nash equilibrium.

Keywords: marine social-ecological systems, enforcement policies, ITQs

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