Individual transferable quota markets with non-compliance and market power

• Main Author: Hatcher, Aaron
• Published: University of Surrey 2008
• Subjects: 338.3727
• Online Access: https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.493022

This thesis presents a theoretical study of the impact of non-compliance and market power in a fishery regulated using individual transferable quotas (ITQs). The study analyses individual firm quota demands in the presence of non-compliance and/or market power and the resultant properties of the ITQ market. The analysis is static and set in a single-species fishery. The implications of non-compliance for a fishery composed entirely of competitive firms are examined first. Here the analysis departs from the convention in the literature on analogous pollution permit markets in that firms' expected penalties are modelled as a function of their relative violations of quotas. This has a significant effect upon the results, including the possibility of quota prices which are higher with non-compliance. The research then focuses on market power in the setting of a single dominant firm faced by a fringe of competitive firms. The dominant firm is allowed market power in the quota market alone and then in both quota and output markets simultaneously. In the latter case the results differ from those previously reported in the literature, including the possibility that the firm may be freely compliant, or if cheating, may have a positive quota demand even with a zero initial quota allocation. Finally, the effects of non-compliance by the dominant firm and the competitive fringe are explored.