Singh, Rajesh; Weninger, Quinn

WP #12007, April 2012

We study harvest uncertainty in a fishery that is managed with tradable quotas. We show that eliminating trading frictions in quota markets can eliminate at-sea discards that occur due to random catch-quota imbalance. In general,discards and the cost of harvesting a fixed quota increases with trading costs. As an alternative, when trading costs are unavoidable, we deduce an ad-valorem tax/subsidy that can eliminate discards while delivering a desired harvest target. These results have important implications for quota program designs, which often limit quota trades to address ancillary management objectives.

JEL Classification: Q, Q2

Keywords: Trading frictions, discards, harvest uncertainty, individual transferable fishing quotas

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