Combinatorial Exchanges for Trading Fishery Access Rights

Fishing boats

Overfishing is a prime environmental concern. Catch share systems have recently been shown to be effective tools to combat overfishing. Yet, the allocation of catch shares has always been a challenging policy problem. There is an active discussion about market-based solutions for the allocation and re-allocation of fishery shares. Unfortunately, until yet there have not been adequate market designs to address the specific requirements in these markets. The recent subsidized share trading market in New South Wales (NSW) is a first-of-a- kind market design for the reallocation of catch shares and the largest combinatorial exchange to date. The market design needed to address several non-standard requirements, most importantly the lack of participation and fair payments. While these features were crucial for the adoption of the proposed design, they led to computationally challenging allocation and pricing problems.

The implemented exchange illustrates how computational optimization and market design can provide new policy tools, able to solve complex policy problems considered intractable only a few years ago. The exchange operated from May to July 2017 and effectively reallocated shares from inactive fishers to those who needed them most. It can provide a template for the reallocation of catch shares in other fisheries world-wide as well.