Suggested Bibliographic Reference: Challenging New Frontiers in the Global Seafood Sector: Proceedings of the Eighteenth Biennial Conference of the International Institute of Fisheries Economics and Trade, July 11-15, 2016. Compiled by Stefani J. Evers and Ann L. Shriver. International Institute of Fisheries Economics and Trade (IIFET), Corvallis, 2016.
Proceedings of the Eighteenth Biennial Conference of the International Institute of Fisheries Economics and Trade, held July 11-15, 2016 at Aberdeen Exhibition and Conference Center (AECC), Aberdeen, Scotland, UK.
Buyback auctions are often proposed as a policy to reduce excess capacity in fishing fleets prior to or in place of implementing a tradable quota program. In this paper I take a critical look at possible designs for such a policy in environments with uncertainty and asymmetric information. In an environment of private values only, it is possible to design a simple buyback auction, called the second price revenue neutral auction, which selects an efficient collection of vessels to remain active, does not require subsidization, and leaves all vessels at least as well off as they would have been without such a policy. But, due to the uncertainty about future stocks, the fishing environment is one with both private and common values. In such an environment, it is the second price revenue neutral auction will not yield an efficient selection of vessels. Inefficient fishers who are optimistic about future stocks will out bid efficient fishers who are pessimistic about those stocks. However, if the buyback auction is preceded with an information mechanism, such as a prediction market or a prediction poll, the expectations of the bidders will be homogenized and efficiency is restored. In this paper we support these propositions with rigorous economic experiments.