A Microeconomic Analysis of the Formation and Potential Reorganization of AFA Coops

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Abstract
The American Fisheries Act establishes procedures under which a group of vessels and a processing plant can form a coop, the main purpose of which is to establish a rights-based regulation program that will protect the interests of both parties. The core principles for coop formation are specified, and operating procedures which must be followed in order to obtain maximum efficiency gains are derived. How the efficiency gains are split among coop members by the choice of the ex-vessel price is demonstrated. In certain circumstances, a vessel and its harvest rights may switch coops. The effects of these shifts on efficiency are analyzed in a way that separates the effects of the vessel shift and of the transfer of production, and that specifies the conditions under which there will be net efficiency gains. Finally, it is demonstrated that the quasi-rents of all members of both coops are affected by a vessel switch. This provides a reference for understanding when a vessel will agree to a shift and the incentives for others to take action to support or oppose the shift.

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