ITQ markets with administrative costs: An application to the industrial common sardine and anchovy fishery in Chile

Using numerical simulations of the mixed common sardine and anchovy fishery of central-southern Chile, this article studies the effects of the distribution of administrative costs between the government and the fishing industry in an individual transferable quota system. Consistent with recent theoretical results, the analysis indicates that the presence and distribution of the administrative costs can have important impacts on the performance of an individual transferable quota system. The numerical simulations reveal significant and non-monotonic effects on the optimal paths of transferable quotas, biomass, quota price, size of the active fishing fleet, and the value of the fishery. While the effects of the distribution of administrative costs are complicated in the case study under analysis, the results suggest that it is likely optimal for the industry and government to share the administrative costs in this fishery.