Toward a More Complete Model of Individual Transferable Fishing Quotas: Implications of Incorporating the Processing Sector

Economic analyses of individual transferable quota (ITQ) fisheries management traditionally have focused on the harvesting sector. However, harvester decisions impact the economic performance of co-dependent processing firms. This paper incorporates both sectors in an analysis of the effect of ITQs on commercial fisheries. Results show that, as a consequence of season elongation under a harvester-only allocation of fishing rights, capital nonmalleability implies that processor quasi-rents will be redistributed to harvesters. These losses could promote political gridlock and jeopardize adoption of an ITQ policy unless they are fully compensated or unless redistribution is avoided by a policy-superior initial allocation of rights to both harvesters and processors.