Optimal fisheries quota allocation under a transferable quota (TQ) management system

Although the concept of transferable quota management in fisheries is rapidly gaining acceptance as a more appropriate management technique than such alternatives as input controls, the basic question of how to optimally allocate initial quotas among the participants of potential participants in a fisheries has not yet received adequate theoretical consideration. Current practices of allocation by administrative decision have perhaps been the source of greatest discontent in the introduction of transferable quota management systems, as well as being economically inefficient. This paper draws upon the extensive theory and practical experience gained in other industries (such as the communication, airline and financial industries) in the allocation of scarce resources to examine the relative efficiency and effectiveness of current and alternative quota allocation systems in a fisheries context. The role of secondary markets in correcting inefficiencies in initial quota allocation is also examined. It is shown that, in these other industries, an auction process has evolved which can lead to the achievement of a wide range of public policy objectives in an economically efficient manner. The application of such an auction process to the allocation of fisheries quotas is considered and the features of such a fisheries quota auction system are presented.