Moral hazard problems in fisheries regulation: the case of illegal landings and discard

This paper treats illegal landings and discards of fish as a moral hazard problem that arises from individual catches that are unobservable to society, and hence are private information. A tax/subsidy mechanism taking into account the asymmetric information problem is formulated as a solution to problems of illegal landings and discards. The incentive scheme uses fish stock size as the tax variable, and can be seen as an alternative to a control policy. Rough estimates from a simulation study suggest that the incentive scheme is potentially useful.