Abstract
This paper develops an approach to simulating markets for individual transferable quotas prior to their actual implementation. This approach is based on linear programming models for individual vessels that allow estimation of market derived demand for quota to simulate the expected equilibrium market price for quota and maximum quasi-rents for alternative quota allocations. The simulated price is an annual lease or rental price. The approach, applied to a sample of longline vessels targeting sablefish (Anoplopoma fimbria) in the Columbia INPFC area of the United States, indicates substantial potential gain in quasi-rent and economic efficiency from quota trade. The simulated quota exchange also indicates potential for concentration of quota. The quota market risks becoming thin, noisy, and hampered by noncompetitive forces, potentially requiring limits to quota transfer and concentration.
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