The Choice of Regulatory Instrument when there is Uncertainty about Compliance with Fishery Regulations

Non-compliance is an important problem for fisheries regulators, and a number of studies have considered optimal enforcement issues within fisheries regulation. Our paper extends this literature by studying the implications of non-compliance for the choice between tax and quota regulation. We first develop a general stock-recruitment model of a search fishery with illegal landings and show that compliance uncertainty (where the regulator is uncertain about the extent of non-compliance) generates an efficiency advantage for taxes over individual transferable quotas. We also provide evidence that uncertainty about compliance is an important source of uncertainty for regulators.