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Economically Sensible Caps on ITQ-Holdings

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  • Many ITQ fisheries are subject to an upper limit or cap on ITQ-holdings by individual companies. The economic rationale for these caps seems to be to reduce the opportunities for monopolistic behaviour by the companies. A possible social cost of the caps is that limiting company size in fisheries, especially small fisheries, may prevent economics of scale from being exploited. This paper investigates this issue. It observes that the primary way to exercise monopoly power in an ITQ fishery is to withhold quota from being fished. It then shows that even when market power exists, in the sense that withholding quota from fishing would influence prices, it is often not profitable for companies to use this power. It further shows that the critical ITQ-holdings, i.e. the holdings at which it becomes profitable to withhold quotas, are in general complicated functions of the conditions in the fishery and the associated markets. With the help of the derived relationships it is shown that the critical quota holdings in the above sense are typically quite large. Finally, the question of the net social gains of reducing possible monopolistic behaviour at the cost of less returns to scale are briefly considered.
  • Keywords: Fisheries Management, Fisheries Economics, Management: Institutions, ITQs and Governance
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  • Ragnar, Arnason. 2014. Economically Sensible Caps on ITQ-Holdings. In: Towards ecosystem based management of fisheries: what role can economics play?: Proceedings of the Seventeenth Biennial Conference of the International Institute of Fisheries Economics and Trade, July 7-11, 2014, Brisbane, Australia. Complied by Ann L. Shriver & Melissa Errend. Corvallis, OR: International Institute of Fisheries.
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  • Fisheries Research & Development Corporation, World Wildlife Fund, MG Kailis Group, AquaFish Innovation Lab, NOAA Fisheries, The European Association of Fisheries Economists, Japan International Fisheries Research Society, United Nations University, NORAD
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