Property Rights and Choice: The Case of the Fishery

Formal property rights are typically established after considerable waste has occurred, despite the effectiveness of such schemes in addressing the inefficiencies of common pool resources. Adoption can be contentious because of the assignment of wealth and political influence that accompany the transition to exclusive property rights. This paper studies how the early involvement of harvesters in policy implementation designed to address the commons’ inefficiency may foster perceived legitimacy and lessen political opposition to the establishment of individual property rights. We demonstrate that it is optimal for a manager facing industry strife and reform delay to allow firms to self-select into the property rights regime. The strategic interaction of harvesters leads to an equilibrium characterized by the global adoption of property rights. Thus, by providing harvesters with a choice between management systems, policy makers can reduce the transaction costs associated with the need to create political consensus, while ensuring an outcome similar to the top-down implementation of market-based management. Evidence is provided from a recent policy change in Maryland fisheries in which the provision of a choice resulted in the overwhelming adoption of individual transferable quotas and the end of the race to fish.