Overcoming the Common Pool Problem through Voluntary Cooperation: The Rise and Fall of a Fishery Cooperative

1. Overcoming the Common Pool Problem through Voluntary Cooperation: The Rise and Fall of a Fishery Cooperative Robert T. Deacon†, Dominic P. Parker‡, and Christopher Costello  University of California, Santa Barbara † Resources for the Future ‡ Montana State University  NBER University of Oslo June 17, 2010

2. Collaborators (Costello is on the left)

3. What happened in Chignik … • In 2001 some license holders petition to form a voluntary cooperative. • Co-op is approved and assigned dedicated share of catch. • Regulator separates seasons of co-op vs. independents. • Co-op shares profits equally; appoints fleet manager to coordinate. • Independents go about business as usual. • Independents file suit against co-op; declared illegal after 2004. • Other Alaska salmon fisheries operated under existing regulations (catch limit and season closure) throughout this period.

4. Research questions • Are there gains from coordinating effort in harvesting a shared resource? What kinds of gains? How large? • Is it possible to structure fishery ‘reform without losers’?

5. Fishery policy questions • Why not just rely on ITQs? • Slow to gain adoption; • Dividing TAC is contentious; • May leave some gains on the table. • Allow a self-selected co-op to form, with dedicated share of TAC. • Chignik Sockeye Salmon Cooperative

6. Related literature: • Efficiency of ITQ systems: Boyce (JEEM, 1992); Hannesson (2004); Grafton, et al. (JLE, 2000); Costello and Deacon (MRE, 2007); Linn, Singh and Weninger (2008). • Fisheries cooperatives and associations: Knapp (2002); Matulich, Sever and Inaba (MRE, 2001); Johnson and Libecap (AER, 1985).

7. Step 1: Model • Model harvesters’ behavior as a 2-stage entry game. • Stage 1: To join or not to join . . . .? • Stage 2: Co-op maximizes group’s profit; Independent fishermen take independent actions. • Solve (backwards) for SP Nash equilibria • Step 2: Empirics • Test model’s predictions. • Estimate co-op’s efficiency effects. • Examine winners and losers.

29. Step 2 Empirics: Facts About Chignik Fishery • One of Alaska’s oldest commercial fisheries (since 1880s) • Purse seine fishing, with ~100 participants • Managed by limited entry and season closures since 1974 • Significant monopsony power; only 1 or 2 processors.

30. How the Co-op Worked in Practice • Joiners sign 1-year contracts before season starts. • Some members fish (22 out of 77) and are paid for effort. • Profits after paying fishers are split equally. • Elected board of directors and appointed manager to allocate effort. • Motivated partly by intention to deliver higher quality product.

31. Map of Chignik Management Area on the Alaskan Peninsula

32. ‘Inside’ locations ‘Outside’ locations Map of Chignik Bay and Near Vicinities

33. Purse seiner Desiderata (fished for co-op)

34. Purse seiner completing set (August 2008)

35. Deck operationson Desiderata (unskilled labor, obviously)

36. Weir installed on Chignik R. each season for counting escapement.

37. Counting escapement

38. Counting escapement

39. Counting escapement

40. Step 2: Empirical Approach • Compare outcomes in Chignik vs. other neighboring fisheries before & during co-op years • Compare outcomes for co-op vs. independent groups • Outcome variables: • value of fishing permits • proportion of permits fished • fishing locations • season lengths (speed of fishing) • catch price • Compare the attributes of joiners vs. independents • Compile (anecdotal) info on public input provision

46. Evidence on co-op public inputs • Precise distance and temporal control of effort, exploit tides; • Centralized info on stock locations, dispatched effort; • Coordinated effort in order to: • match processor capacity (released live fish!) • meet fishery manager’s goals; • raise product quality (delivered live fish); • Installed stationary ‘fixed leads’ (funnel) on migration route.

47. ‘Fixed leads’ Approximate position of fixed leads