Transferable rights in a recreational fishery: an application to the red snapper fishery in the Gulf of Mexico

Abstract

Overfishing of red snapper in the Gulf of Mexico has significantly increased lately. A major regulation to reduce the overfishing is Total Allowable Catches (TAC) in combination with a season closure. The restrictions on entry lead to an inefficient outcome, however, because the resource is not used by the fishermen who value it the most. As an alternative to restricting entry, transferable rights (TR) programs are being increasingly considered. Under a TR program, a market is created to trade a right to use a resource and the total benefits of the participants are maximized through such a trade. The principal objective of this dissertation is to comprehensively assess economic and biological consequences of the red snapper fishery for the TR program. To date the literature lacks sufficient discussion of how recreational TR programs would function. I, therefore, propose an economically desirable institutional framework for the TR program in the recreational fishery. I draw some lessons from hunting programs and applications of other TR programs to find better schemes for the TR program in the recreational fishery.This dissertation uses theoretical and empirical models as well as institutional settings to develop the TR program. A theoretical model is provided to investigate which unit of measurement for the TRs is preferable. For empirical models I first estimate an empirically based recreation demand that incorporates TR permit demand and then develop a simulation submodel using the estimated demand. I find price instruments, such as fees or TR programs, are very efficient to reduce fishing trips but they also lead to distributional impacts on trips by low income (or low cost) anglers. Partial simulation results indicate that an efficiency benefit of the TR program would be significant because recreational trip demand in the current closed season is not trivial. I conclude that the TR program in the recreational fishery will economically and biologically provide a great deal of merit to reduce the overfishing situation and a substantial efficiency gain to Gulf anglers. Some institutional barriers, especially from the large transaction cost can also be overcome if electronic systems or the Internet are used.