On the efficiency of the individual transferable quota system

Abstract:

The evolution of the idea of the individual transferable quota(ITQ) system was introduced in the first part of the paper.And then under the neo-classic assumptions,the efficiency of ITQ system and its mechanism to correct the distortion of the efficiency of utilization on the fisheries resources under open access system were discussed in detail in the second part of the paper.ITQ system was proved to be efficient under such assumptions.In the third part of the paper,transaction costs of ITQ system and their influence on its efficiency were analyzed on the basis of the neo-classic equilibrium,and the following conclusions were reached that the existence of transaction costs can not only cause deflection of quantity and price of quotas from Pareto efficient level,but also offset the benefits of the system.So practical methods to reduce transaction costs of the system have to be found in order to adopt it in China.