Transferable dynamic stock rights

Individual transferable quotas (ITQs), while solving many short-run externalities, provide limited incentives for individual fishers to conserve the resource. All decisions that determine harvests are made by the government, and the shares of future harvests that are allocated to any particular fisher are not affected by that fisher's actions. For example, there is no incentive for the individual fisher to avoid catches of smaller fish. In fact, the incentives for discarding and high-grading may be worse under ITQs than under other forms of management. This analysis proposes a 'transferable dynamic stock right' (TDSR), under which rights are allocated to fishers as life-cycle shares of each year-class that can be harvested. Year-class allocations would change each year to reflect catches, growth and natural mortality. Allocations of newly-recruited fish would be in proportion to the share of the rights to the breeding stock held by each fisher. Under TDSRs, the fisher would internalize the economic decision about whether to catch a given year-class as small fish or as a larger tonnage of large fish. TDSRs provide the fisher with incentives to harvest in ways that maximize the value of the catch from a given year-class.