An Experimental Analysis of a Points-Based System for Managing Multispecies Fisheries

An industry group has proposed a novel system for managing the Northeast Multispecies Fishery. Each harvester would be endowed with a budget of points, and each species would have a "point price," or number of points that must be paid out of his budget when landing that species. By varying the point prices throughout the season, management could redirect effort across species. This paper presents a benchmarked experimental testbed of this management system, and shows that harvesters do respond to point prices, which can be chosen to support harvest of most of the allowable catch of each species without severely over-harvesting any of them. Key Words: multispecies fishery, points system, economic experiment, quota, derby (ProQuest: ... denotes formula omitted.) The Northeast Multispecies Fishery has proven to be a particularly challenging management problem. 1 It consists of 15 jointly harvested groundfish species, in 19 stocks, distributed over a large area and pursued by highly heterogeneous harvesters, with varying ports, vessel size, gear type, and preferred target species. Many of the stocks, including some economically valuable ones, are abundant, but other stocks are badly depressed. The fishery is currently (until May 2010) managed by a system of transferable days at sea, which constrains how much time vessels may spend harvesting, combined with daily trip limits for certain species. Harvesters find this system unsatisfactory because the allocations of days at sea are limited by the most depressed stocks, meaning that harvesters are not allotted time to harvest much of the biologically determined total allowable catches (TACs) of many of the most valuable stocks. As a result, industry and regulators are interested in identifying alternative management systems that are politically feasible2 and provide better opportunity for harvesters to profit from abundant stocks, while allowing recovery of depressed stocks. One novel approach has been developed by the Northeast Seafood Coalition (2006). Rather than an initial allocation of quota shares in each of the stocks, this so-called "Points System Proposal" would establish an initial allocation of "points" to each harvester. Although this initial allocation would be based on landings history, individuals would not be granted an access privilege to any particular amount of any species of fish. Instead, the points system proposes to assign a "biological point value" (BPV) to each of the stocks and fishermen would "spend" their points based on what they catch. In this manner, a weak stock with a low TAC would be assigned a higher (perhaps much higher) BPV than a rebuilt stock or one that has a higher TAC; this would encourage harvesters to focus their effort on stocks that cost fewer points.3 As proposed, the BPV would be adjusted periodically in response to current harvest activity and stock abundance to assure that TACs would not be exceeded. This system would operate much like the Federal Reserve's overnight lending rate policy, wherein a regulatory authority can control the actions of agents in an economy by continuously adjusting key price ratios, thus altering behavioral incentives. From an economic perspective, the points system has some of the same desirable features associated with individual transferable quota (ITQ) programs (Arnason 2002). Specifically, fishermen would have an incentive to maximize the value of their allocated points instead of maximizing catch. Further, it creates an interest in the longer-term health of the resource to increase the value of the allocation. The industry also feels that the points system also offers some economic flexibility that an ITQ would not. Under an ITQ system, individual harvesters would need to enter the quota market to obtain the desired portfolio of quota for the fishing season. Changing the portfolio to match realized catch would require the harvester to go back to the quota market and incur the potentially high transaction costs of acquiring or selling quota to achieve the correct balance of the 19 quota instruments. …