Development of a Market for Transferable Fishing Privileges in the Florida Spiny Lobster Commercial Fishery

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Development of a Market for Transferable Fishing Privileges in the Florida Spiny Lobster Commercial Fishery
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1 online resource (158 p.)
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english
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Maclauchlin,Kari Ann
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University of Florida
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Thesis/Dissertation Information

Degree:
Doctorate ( Ph.D.)
Degree Grantor:
University of Florida
Degree Disciplines:
Interdisciplinary Ecology
Committee Chair:
Larkin, Sherry L
Committee Co-Chair:
Binford, Michael W
Committee Members:
McCarty, Christopher
Lindberg, William J
Jepson, Michael E

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Subjects / Keywords:
cultural -- fisheries -- florida -- lobster -- management -- marine -- markets -- networks
Interdisciplinary Ecology -- Dissertations, Academic -- UF
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Interdisciplinary Ecology thesis, Ph.D.
bibliography   ( marcgt )
theses   ( marcgt )
government publication (state, provincial, terriorial, dependent)   ( marcgt )
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Electronic Thesis or Dissertation

Notes

Abstract:
The overall goal of this study was to examine the development over time of a market for transferable fishing privileges in which fishermen must find trading partners and negotiate sales without a formal or official marketplace, and to identify factors that affect the market. The Florida spiny lobster trap certificate program, whereby units of effort have been tradable since 1993, was used as a case study. The program provides 17 years of data and exists in a fishery characterized by two distinct ethnic groups (Latino and non-Latino), and fishermen working in economically and culturally different regions in south Florida. The research design used an interdisciplinary approach, utilizing several methods of data collection and analysis, including social network analysis, in-depth interviews with fishermen, analysis of negotiated prices, and analysis of spatial distribution of certificate ownership. After examining the historical network visualizations of the market for units of effort (traps or trap certificates), this dissertation focused on three specific aspects of the market: 1) factors affecting the negotiated average certificate price of individual transactions; 2) the effect of proximity and ethnicity on the incidence of trades; and 3) how distribution of certificate ownership has changed, with a focus on the role of brokers in the trap certificate market. Overall, the results showed that program provisions, social and spatial fishery characteristics, certificate price and transaction size, and brokers have affected the trap certificate market in different ways. The provisions included in the trap certificate program, such as mandated effort reductions and different transfer fee schedules based on certificate type, influence how fishermen make decisions when buying or selling certificates. The social characteristics, such as language, and geography of the lobster fishery also play a role in market development, particularly in that transfers may reflect the importance of social ties in the fishing communities; fishermen use their social connections to find buyers and sellers and negotiate prices. The study also showed the importance of brokers in the development of this dynamic market, in that these individuals lowered transaction costs, contributed to consolidation of latent effort, and facilitated trades between certificate holders who may not have been able to make the transfer on their own. This dissertation highlights the importance of understanding and incorporating the social characteristics and geography of the fishery into management and research, and further emphasizes how studies on markets for transferable fishing privileges can contribute to better design for these types of programs. The findings contribute to a more thorough understanding of how a newly created market for transferable fishing privileges will develop and how program provisions and social fishery characteristics such as ethnicity and proximity will play a role in trades, which ultimately affect the realization of management goals.
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In the series University of Florida Digital Collections.
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Includes vita.
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Includes bibliographical references.
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Statement of Responsibility:
by Kari Ann Maclauchlin.
Thesis:
Thesis (Ph.D.)--University of Florida, 2011.
Local:
Adviser: Larkin, Sherry L.
Local:
Co-adviser: Binford, Michael W.
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1 DEVELOPMENT OF A MARKET FOR TRANSFERABLE FISHING PRIVILEGES IN THE FLORIDA SPINY LOBSTER COMMERCIAL FISHERY By KARI MACLAUCHLIN A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULF ILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY UNIVERSITY OF FLORIDA 2011

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2 2011 Kari MacLauchlin

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3 This dissertation is dedicated to my parents for their never ending support and love, and to Mema and Pop, who forever tie me to the ocean.

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4 ACKNOWLEDGMENTS I would first like to acknowledge Dr. Steve Humphrey and the School of Natural Resources and Environment at the University of Florida for prov iding my funding throughout my masters and doctoral programs. This dissertati on research was supported by a doctoral dissertation improvement grant from the National Science Foundation. Speaking of support, I have required a lot of the nonmonetary kind, which has been so generously and endlessly given by my friends and family. I w ant to thank the amazing group of friends through school and otherwise who have supported and cheered for me during graduate school and beyond, in particular Jenny Haddle, Joanna Reilly Brown, Liz Binford, Lindsay Eddleblute, Jonathan Ament, Ava Lasseter, Arika Virapongse, Stuart Muller, and Richard Plate. Newer friends who were there for onsite support in D C include Lisa Vandiver, Kora Dabrowska, Katie Nichols, and Steve Leathery and most recently I have had Charleston friends on call, including Alex N ackashi, Anna Martin, and Julie ODell. My family has been amazing and supportive through thick and thin. I hope to repay them all one day for being so great. I think at times they never thought I would finish, and probably wondered what I was doing, but never doubting that I could. I especially thank my parents for being proud of me, letting me choose my own path, and for all the care packages. I had much help during the project. Bill Sharp and Aaron Podey at the Florida Fish and Wildlife Conservation Co mmission provided the fishery and transfer data. Manoj Shivlani, Doug Gregory, and Ed Little were most helpful in giving me the scoop and introducing me to people. My research assistant, Kayla Hill, was the best assistant I

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5 could have asked for. The Florida Keys Commercial Fishermens Association was my key contact, and while I cannot divulge the names of a few specific fishermen (the IRB says), I have in mind some amazing folks that made the fieldwork a great experience. I also thank all the fishermen who helped me out by participating in the interviews. Im m ediately after fieldwork I moved to Washington, D C for the Knauss fellowship, which was a great experience. I would like to acknowledge NOAA Sea Grant for the fellowship, and Mark Holliday in the NMFS Policy Office for the experience and the support during the dissertation final stages. I would like to thank my doctoral committee: Michael Binford, Bill Lindberg, Chris McCarty, and Michael Jepson. I especially want to acknowledge Mike Jepson, who went through thi s with me once already (for my m asters) and I am thankful to have as part of this again. I also need to thank Mike for having the original idea to use social network analysis for this project. I must acknowledge Eric Jones and Chuck Adams, who are not on my committee but have played very important roles in my time as a graduate student and for this dissertation. Of course, I want to thank Sherry Larkin, my committee chair, for being such a great advisor. Through many, many discussions, she taug ht me how to think, how to apply what I have learned, and how to argue my point. She also never let me back down, and always believed in me and made me feel like I deserved all I achieved. Dr. Larkin is a role model in every way, proof that it is possible to be an accomplished academic, dedicated teacher, and a fantastic mentor, and at the same time be a mom, wife, and friend. I feel like everything changed when I became her student so many

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6 doors opened up because of Dr. Larkin. I am so fortunate that she hung in there with me. It has been great to work with her and I look forward to many future projects.

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7 TABLE OF CONTENTS page ACKNOWLEDGMENTS .................................................................................................. 4 LIST OF TABL ES .......................................................................................................... 10 LIST OF FIGURES ........................................................................................................ 12 ABSTRACT ................................................................................................................... 14 CHAPTER 1 INTRODUCTION .................................................................................................... 16 Transferable Fishing Privileges ............................................................................... 16 Markets for Transferable Fishing Privileges ............................................................ 21 Transferable Fishing Privilege Programs ................................................................ 22 Problem Statement ................................................................................................. 25 Objectives ............................................................................................................... 27 Outline and Methods ............................................................................................... 28 Chapter 2 .......................................................................................................... 28 Chapter 3 .......................................................................................................... 29 Chapter 4 .......................................................................................................... 30 Chapter 5 .......................................................................................................... 30 Chapter 6 .......................................................................................................... 31 Summary ................................................................................................................ 31 2 USING NETWORK VISUALIZATIONS TO EXAMINE THE MARKET FOR SPINY LOBSTER TRAP CERTIFICATES .............................................................. 33 Research Context ................................................................................................... 34 The Fishery ...................................................................................................... 34 The Lobster Trap Certificate Program .............................................................. 35 Methods .................................................................................................................. 37 Data .................................................................................................................. 37 Social Network Analysis ................................................................................... 38 Results .................................................................................................................... 40 All Seasons (19942008) .................................................................................. 40 First Season (19931994) ................................................................................. 41 Third Season (19961997) ................................................................................ 41 Sixth Season (19981999) ................................................................................ 42 Eighth Season (20002001) .............................................................................. 43 Eleventh Season (2 003 2004) .......................................................................... 43 Fifteenth Season (20072008) .......................................................................... 44 Summary ................................................................................................................ 44

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8 3 FACTORS AFFECTING NEGOTIATED PRICES IN A MARKET FOR EFFORT SHARES IN the FLORIDA SPINY LOBSTER FISHERY ........................................ 58 The Florida Spiny Lobster Commercial Fishery and the Trap Certificate Program ............................................................................................................... 61 Transfer Data and Trade Information ...................................................................... 63 Transactions Data ............................................................................................ 63 Social Network Analysis ................................................................................... 65 Price Model ............................................................................................................. 66 Characteristics of the Transaction .................................................................... 67 Characteristics of the Buyer and the Seller ...................................................... 69 Model Specification .......................................................................................... 71 Results .................................................................................................................... 73 Summary ................................................................................................................ 78 Epilogue: Interviews of Market Participants ............................................................ 80 4 EFFECTS OF PROXIMITY AND ETHNICITY ON TRADES IN A MARKET FOR TRANSFERABLE FISHING PRIVILEGES: AN APPLICATION OF THE QUADRATIC ASSIGNMENT PROCEDURE (QAP) ............................................... 91 Methods .................................................................................................................. 9 3 Data .................................................................................................................. 93 QAP Analysis of the Trap Certificate Market .................................................... 94 Descriptive Characteristics of the Market ................................................................ 95 Results .................................................................................................................... 96 Discussion .............................................................................................................. 98 Summary .............................................................................................................. 100 5 THE ROLE OF BROKERS AND TRANSFERABILITY IN SPATIAL DISTRIBUTION OF SPINY LOBSTER TRAP CERTIFICATES ............................ 111 Data ...................................................................................................................... 114 Market Activity ...................................................................................................... 115 Number of Certificates in Geographic Areas ......................................................... 117 Percentage of Total Certificates in Geographic Areas .......................................... 117 Brokers ................................................................................................................. 118 Broker 1 .......................................................................................................... 118 Broker 2 .......................................................................................................... 119 Broker 3 .......................................................................................................... 120 Broker 4 .......................................................................................................... 120 Broker 5 .......................................................................................................... 121 Summary .............................................................................................................. 122 6 CONCLUSIONS ................................................................................................... 135 Implications for Fisheries Management ................................................................ 137 Significance of Findings ........................................................................................ 145

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9 Limitations of the Study ......................................................................................... 146 Future Research ................................................................................................... 148 LIST OF REFERENCES ............................................................................................. 152 BIOGRAPHICAL SKETCH .......................................................................................... 158

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10 LIST OF TABLES Table page 2 1 Total nodes, total ties, and number of buyer and sellers in each visualization ... 56 2 2 Total number of nodes for each ethnic designation and region .......................... 57 3 1 Variable definitions and hypotheses ................................................................... 87 3 2 WLS price model estimation results ................................................................... 88 3 3 Pearson c orrelation of buyers and sellers by region ........................................... 89 3 4 Tobit and WLS Estimation Model Results after Accounting for Zero Prices ....... 90 4 1 Number of nodes and ties for each season in network form ............................. 105 4 2 Distribution of transactions based on location and ethnicity ............................. 106 4 3 Results of QAP analysis using attribute Area ................................................... 107 4 4 Results of QAP analysis using attribute Ethnicity ............................................. 108 4 5 Results of crosstabulations for attribute Ethnicity and transaction size ........... 108 4 6 Results of crosstabulations for attribute Area and transaction size ................. 109 4 7 Descriptive characteristics of networks with selected transactions (< 200 certificates transferred) ..................................................................................... 109 4 8 Results from QAP analyses for attribute Ethnicity using only tr ansactions with less than 200 certificates .................................................................................. 110 5 1 Region and market participation for each of the five brokers ............................ 133 5 2 Number o f certificates and transactions for Broker 1 in each year of participation ...................................................................................................... 133 5 3 Number of certificates and transactions for Broker 2 in each year of participation ...................................................................................................... 133 5 4 Number of certificates and transactions for Broker 3 in each year of participation ...................................................................................................... 134 5 5 Number of certificates and transactions for Broker 4 in each year of participation ...................................................................................................... 134

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11 5 6 Number of certificates and transactions for Broker 5 in each year of participation ...................................................................................................... 134

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12 LIST OF FIGURES Figure page 2 1 Map of the study regions in south Florida and the Florida Keys ......................... 47 2 2 Number of active lobster trap certificates over ti me ............................................ 48 2 3 An example of social network analysis. A) Example adjacency matrix; B) corresponding visualization of the network ......................................................... 48 2 4 Network visualization of all lobster trap certificates transactions from 1994 through 2008 ...................................................................................................... 49 2 5 Network visualization of certificate transfers in 19931994 season .................... 50 2 6 Network visualization of certificate transfers in 19961997 season .................... 51 2 7 Network visualization of certificate transfers in 19981999 season .................... 52 2 8 Network visualization of certificate transfers in 20002001 season .................... 53 2 9 Network visualization of certificate transfers in 2003 2004 season .................... 54 2 10 Network visualization of certificate transfers in 20072008 season .................... 55 3 1 Total num ber of transactions a nd number of trap certificates transferred ........... 84 3 2 Total annual spiny lobster landings by year ........................................................ 85 3 3 Range of trap certificate pric es and average price by year ................................. 86 4 1 Proportion of total transactions between two indiv iduals from the same area o r of the same ethnicity ................................................................................... 103 4 2 Histogram of distr ibution of transaction size .................................................... 104 5 1 Spiny lobster landings ...................................................................................... 125 5 2 Net inflow of certificates into each region in each fishing year .......................... 126 5 3 Number of certificates in each region over time................................................ 127 5 4 Percentage of total certificates in each region over time .................................. 127 5 5 Market activity of Broker 1 ................................................................................ 128 5 6 Market activity of Broker 2 ................................................................................ 129

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13 5 7 Market activity of Broker 3 ................................................................................ 130 5 8 Market activity of Broker 4 ................................................................................ 131 5 9 Ma rket activity of Broker 5 ................................................................................ 132

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14 Abstract of Dissertation Presented to the Graduate School of the University of Florida in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy DEVELO PMENT OF A MARKET FOR TRANSFERABLE FISHING PRIVILEGES IN THE FLORIDA SPINY LOBSTER COMMERCIAL FISHERY By Kari MacLauchlin August 2011 Chair: Sherry Larkin Cochair: Michael Binford Major: Interdisciplinary Ecology Th e overall goal of this study was to ex amine the development over time of a market for transferable fishing privileges in which fishermen must find trading partners and negotiate sales without a formal or official marketplace and to identify factors that affect the market. The Florida spiny lobster trap certificate program, whereby units of effort h ave been tradable since 1993, was used as a case study. The program provides 17 years of data and exists in a fishery characterized by two distinct ethnic groups (Latino and nonLatino), and fishermen working in economically and culturally different regions in south Florida. The research design used an interdisciplinary approach, utilizing several methods of data collection and analysis including social network analysis, in depth interviews with fishermen, analysis of negotiated prices and analysis of spatial distribution of certificate ownership. After examining the historical network visualizations of the market for units of effort (traps or trap certificates), this dissertation focused on three s pecific aspects of the market: 1) factors affecting the negotiated average certificate price of individual transactions; 2) the effect of proximity and ethnicity on the incidence of trades; and 3)

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15 how distribution of certificate ownership has changed, with a focus on the role of brokers in the trap certificate market. Overall, the results show ed that program provisions, social and spati al fishery characteristics, certificate price and transaction size, and brokers have affect ed the trap certificate market in different ways. The provisions included in the trap certificate program, such as mandated effort reductions and different transfer fee schedules based on certificate type, influence how fishermen make decisions when buy ing or sell ing certificates. The s ocial characteristics, such as language, and geography of the lobster fishery also play a role in market development, particularly in that transfers may reflect the importance of social ties in the fishing communities; fishermen use their social connect ion s to find buyers and sellers and negotiate prices. The study also showed the importance of brokers in the development of this dynamic market, in that these individuals lowered transaction costs, contributed to consolidation of latent effort, and facilitate d trades between certificate holders who may not have been able to make the transfer on their own. This dissertation highlights the importance of understanding and incorporating the social characteristics and geography of the fishery into management and research, and further emphasizes how studies on markets for transferable fishing privileges can contribute to better design for these types of programs. The findings contribute to a more thorough understanding of how a newly created market for transferable f ishing privileges will develop and how program provisions and social fishery characteristics such as ethnicity and proximity will play a role in trades, which ultimately affect the realization of management goals.

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16 CHAPTER 1 INTRODUCTION Transferable Fishi ng Privileges T ransferable fishing privileges are a type of management system whereby units of a specified maximum level of catch or effort (usually only in commercial fisheries) are held privately by individuals (similar to ownership of private property) as opposed to collectively by a group. These privileges are often held in perpetuity and can be bought and sold, just like other property (valuable assets). Transferable privilege management systems are increasingly used in fisheries around the world, an d have been shown to address several fisheries issues, including economic inefficiency (Grafton 1996; Hanna and Munasinghe 1995; Squires, Kirkley, and Tisdell 1995), overfishing (Costello, Gaines and Lynham 2008; Leal 2002), and encourage conservation beh avior and innovation (Griffith 2008; Townsend 1998). Transferable fishing privileges are also known as market based management, limited access privileges (LAPs) individual fishing quotas (IFQs) catch shares, effort shares, and tradable permit programs among other terms In general, transferable fishing privileges are a form of capand trade management used primarily in commercial fisheries, in which the entire commercial sector has an overall limit on number of permits, total allowable catch, or amount of fishing effort, but individual privileges are divided among eligible shareholders or permitted fishermen. Some transferable fishing privileges, such as IFQs and catch shares, control the output of the fishery by designating a portion of the total all owa ble catch to each individual or group, and that is the limit for harvest by that fisherman or group of fishermen. Usually these are allocated each year to fisherman in pounds, and when the shareholder reaches that limit,

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17 he/she/the group must either stop f ishing for the season or obtain additional shares (or pounds) from another fisherman or entity by purchasing or leasing the quota to cover the catch. Transferable fishing privileges such as effort shares or days at sea are input controls. In fisheries managed with input controls, harvest is not directly limited at the individual level even though the amount of effort is limited, which may help control harvest. In these systems, if a fisherman wants to increase the size of his operation beyond his current privilege holdings, he will need to acquire the privileges to use more gear or more days to fish (depending on the program) from another individual who will not fish the privileges in that fishing season. In much of the academic literature, transferable f ishing privileges are described as rights, as in the rights to a share of the fishery (Pomeroy n.d.) or enforceable authority to undertake particular actions related to a specific domain rules exist that authorize or require particular actions in exerci sing that right (Ostrom and Schlager 1996:130). In the Reauthorized MagnusonStevens Fishery Conservation and Management Act, transferable fishing privileges are designated as limited access privileges and specifically stated to be the privilege to harv est, but not a right, title or interest (MSA 3A(a)). Transferable fishing privilege management is founded in theory and implementation of these programs has expected outcomes. Typically, transferable privileges are most useful in addressing issues of ov ercapitalization and overcapacity of the fleet. In these cases, the management goals include reducing effort in order to improve efficiency, eliminating the race to fish and increase stability, such as providing

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18 fresh product throughout the year instead of for just a short period, creating an annual glut in the market. Because fisheries that are suitable for privilegebased management usually have too many people and too few fish, consolidation of the fleet is expected. From an economic standpoint, this will result in increased efficiency and stabilization of the fi shery (Larkin and Milon 2001). Excess capital is reduced (Brandt 2007; Buck 1995) by way of less efficient fishermen finding it more beneficial to sell shares than to continue fishing (Leal 2002; Ti etenberg 2002; Townsend 1998). The remaining fishermen presumably the more efficient will benefit from reduced competition at sea and the ability to fish safer and supply higher quality (and hopefully higher valued) products (Brandt 2005; Buck 1995; McCay et al. 1995) From an ecological perspective, if consolidation reduces effort, a privileges based program can contribute to re building and / or maintenance of stock levels (Griffith 2008; McCay 1995). Reduced effort or flexibility in ti ming of harvest can also result in increased stock levels as fewer but larger fish are harvested under the same quota (Larkin and Sylvia 2004). Overcrowding at harvest sites may be reduced in addition to slower and more selective fishing producing lessened impact s on the habitat ( Leal 2002; Griffith 2008). Indirect benefits for the environment include incr eased stewardship by shareholders by providing an additional incentive to conserve the resource as share value increases (Yandle 2001) and goal alignment of management and resource users (Griffith 2008). In sum, transferable fishing privileges in fisheries management can lead to consolidation of share ownership, which can increase efficiency and reduce effort.

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19 Conversely, the transferability of shares can also lead to negative social impacts. Theoretically, consolidation (if it occurs) should be the result of the least efficient firms (i.e., those who spend the most to harvest) selling shares and leaving the fishery, regardless of operation size, but some studies have found factors other than efficiency affect the decision for the fisherman whether or not to exit, such as lifestyle and alternative employment opportunities (Brandt 2001; McCay 1995; Stewart, Walshe, and Moodie 2006; Yandle and Dewees 2008). Additionally, habitat quality may be compromised by shares ending up in the hands of fishermen using damaging gear or those with higher bycatch, as there is no guarantee that the fishermen who buy privileges have fewer impacts on the resource (Tietenberg 2002) A primary c oncern voiced in some studies on transferable fishing privileges is the loss of sm allscale fishermen, historical fishing presence, and fishing dependent communities under privileges based regimes which studies suggest negatively impact the culture, history, an d community ties in these areas (McCay 1995; Stewart, Walshe, and Moodie 2006; Yandle and Dewees 2008). Additionally, small scale fishermen are key components for markets requiring very fresh fish, as these operations generally work on day trips only Wingard (2000) noted that smaller firms have less access to capital to enter the fishery and/or to purchase additional shares to increase holdings and s mallscale fishermen working under New Zealand Individual Transferable Quota ( ITQ) systems are more l ikely to exit due to being bought out by larger firms ( Stewart, Walshe, and Moodie 2006; Yandle 2001). Knapp (2011) found that permit ownership in the Alaska salmon fishery has moved from local to nonlocal over time, impacting rural communities that were economically dependent on the fishery.

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20 P rivileges based management tools are also criticized in studies that suggest that these programs discourage new entrants from entering the fishery by increasing capital required to start a fishing business (Buck 1995 ; McCay 1995), and particular concern is the disruption of inter generational fishing in families when the second generation has the boat, permits, and knowledge, but cannot afford the additional costs of buying or leasing quota or effort shares (McCay 2004). In the Florida spiny lobster fishery, fishermen noted the disappearance of the traditional process of working ones way up to captain as crew individuals who perhaps would have been the next generation of fishermen but cannot afford to buy certificates along with a boat, traps, and permits (Shivlani and Milon 2000; Shivlani et al 2004 ). Because reduced effort leads to reduced employment opportunities in the fishery and affiliated industries such as fish houses and dealers a broader effect is on the coastal communities that depend on the fishing industry working under a privileges based system (Buck 1995; Knapp 2011; McCay 1995; McCay 2004, Stewart, Walshe, and Moodie 2006). Past studies have suggested that t ransfers of quota or shares very likely move ownership, effort, and ultimately, the product ( Knapp 2011; McCay 1995; Tietenberg 2002). McCay et al (1995) suggested that g eographical changes in ownership may potentially affect outside businesses and reduce presence of commercial fishing in t radition al fishing communities In Alaska, access to capital and lower valuation of salmon permits by fishermen in rural areas has led to changes in local and nonlocal permit ownership (Knapp 2011). Specifically in the Florida Keys, the spiny lobster fishermen reported that communities are changing due to movement of

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21 trap certificates from one area to the other, affecting the cultural landscape in addition to businesses such as fish houses and docking ar eas (Shivlani and Milon 2000). Markets for Transferable Fishi ng Privileges When a privileges based fishery management program is established, a market for an entirely new asset is created. Many studies have focused on these types of programs around the world but few have addressed issues with the market, which is the mechanism through which expected goals and outcomes are meant to be achieved. Failure of the market to function well may result in failure of achieving economic gains, which in turn may have consequences for conservation of the resource (Connor and Alden 2001; Sanchirico and Newell 2003). Economic theory outlines the fundamentals of how the market mechanism works in a transferable fishing privileges program, particularly in reference to share price. At the onset of a program, quota prices are highly dispersed as the participants become accustomed to the system (Kerr, Newell, and Sanchirico 2003; Newell, Sanchirico, and Kerr 2005) but should reach an equilibrium (Anderson and Sutinen 2005). For example, Kerr, Newell, and Sanchirico (2003) found that quota prices increased in general due to efficiency gains following implementation of the New Zealand ITQ system. After quota price dispersion decreases and stabilizes, quota price can be used as a means of information on the stock and the fishery that can compl ement data collected by managers through other means (Arnason 1991; Batstone and Sharp 2003). As a reflection of the fundamental value of the share, quota prices will fluctuate or stabilize with the present value of the expected future profits from fishing (Anderson and Sutinen 2005; Arnason 1991; Batstone and Sharp 2003; Newell, Sanchirico, and Kerr 2005; Milon, Larkin, and Ehrhardt 1999).

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22 As noted above, the share price should signal the expected profitability of the privilege to harvest over the time period the privilege is valid (e.g., in perpetuity, for ten years, etc.) ( Newe ll, Sanchirico, and Kerr 2005). Kerr, Newell, and Sanchirico (2003) found that quota prices in New Zealand increase as export prices increase; as demand increases due to a binding total allowable catch; and with the general economy doing well. The study also suggested that quota price falls with higher fishing costs and ecological uncertainty. It is common for quota price data to be unavailable or in adequate, usually because of mi sreporting or inclusion of nonmonetary items in the exchange, such as gear or labor (Kerr, Newell, and Sanchirico 2003; Lindner, Campbell, and Bevin 1992). Connor and Alden (2001) summarized the general conditions for a market to function properly, including: rights that are well defined and protected under the policy; high numbers of buyers and sellers; available and quality information; and low transaction costs. The number of market participants is important because a low number translates to higher tra nsaction costs to find a buyer or seller, which in turn affects the efficiency of the market (Hahn and Hester 1989; Newell, Sanchirico, and Kerr 2005). The information flow, the life blood of markets (Connor and Alden 2003), is also important in providing information about pricing and expected profitability of the stock (Arnason 1991; Newell, Sanchirico, and Kerr 2005). Transferable Fishing Privilege Programs In the United States and around the world, there are many fisheries managed with various forms of transferable fishing privileges; a report by the Environmental Defense Fund cites 275 privileges based programs managing 850 species in 35 nations (Bonzon et al 2010). Many fisheries are managed under Individual Transferable Quotas (ITQs)

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23 such as in New Zealand ( Stewart Walshe, and Moodie 2006; Yandle 2001), Australia (Grafton 2009; Kompas and Che 2005) and several European countries (Arnason 2005; Chu 2009; Hannesson 2005). In addition to ITQ systems, many fisheries are managed with gear restrictions, seasonal and spatial closures, or limited entry (Bradshaw, Williamson, and Wood 2000). Currently in the U.S., there are 31 fisheries managed with transferable fishing privilege program s at the state and federal level (Bonzon et al 2010). Most of these ma nage with output control in the form of individual or group quotas, but several use transferable effort shares such as the Florida spiny lobster trap certificate program. In 2010, the NOAA Fisheries Service released the NOAA Catch Share Policy to provide guidance to fisheries managers in designing programs. The Policy, along with the implementation of two largescale multi species catch share programs (one in New England, the other on the Pacific coast) have generated considerable debate on the benefits an d impacts of this type of management. With the New England sector program, for example, self selecting groups of fishermen called sectors are allocated a collective quota based on landings history of the sector members. At this time, the New England sect or program is only beginning its second year, but the perceived outcomes are conflicting (e.g., Farwell 2011). In the s outheastern U.S., there are few transferable fishing privilege programs relative to the rest of the country, and these are not without disagreements of the benefits and impacts on fishermen. With the Gulf of Mexico Red Snapper Individual Fishing Quota (IFQ) program, opinions on the outcome of the program vary (Miller 2011), with supporting arguments claiming that the fishery is more profit able and the

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24 program resulted in an increase in the Total Allowable Catch (TAC). Opponents of the program, however, cite high costs of leasing quota and consolidation as the causes of significant economic and social impacts on the fishermen (Miller 2011). The Florida spiny lobster trap certificate program, one of the first transferable privileges based programs in the U.S., is not without debate on the benefits and costs to the fishermen, the fishery and local communities While reduction of traps and con solidation of effort has likely decreased overcapitalization, bycatch mortality and habitat damage, fishermen have experienced increased capital requirements to enter the fishery (i.e., buy certificates ) consolidation of the fleet, and changes in the soci al structure of the fishery (Shivlani et al 2004; Shivlani 2009). To further the debate, a federal bill was passed recently that limits development of new catch share programs along the East Coast and in the Gulf of Mexico. The Jones Amendment (Amendme nt 548) to the House of Representatives FY 2012 Appropriations Bill (H.R. 1) prohibits approval by the Secretary of Commerce for new catch share programs in the New England, MidAtlantic, South Atlantic, and Gulf of Mexico regions until FY2012. The prohibi tion was proposed based on vocal opposition to new and existing catch share programs in these regions and negative social impacts on the fleets. The Jones Amendment is not the first time that Congress has addressed transferable fishing privileges. In 1996 Congress imposed a moratorium on Limited Access Privilege Programs (LAPPs) and requested a review by the National Academy of Sciences (NRC 1999). The moratorium was lifted in 2002, but not without the clear rec ognition that these programs are associated with costs and benefits. Since then,

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25 NOAA Fisheries Service has issued guidance on development and amendment of catch share programs (NMFS 2007) and the Government Accountability Office has produced several reports on these types of fisheries management pr ograms (GAO 2002, 2004a, 2004b, 2005). Fisheries management is a complex process and decisionmakers must balance a suite of ecological, economic, social and political factors when making rules and designing management programs, but rarely has there resulted such a polarizing effect because of a management tool as with transferable fishing privileges, specifically in the U.S. Additionally, both the positive and negative impacts generally come from the same outcomes of these programs, such as consolidation, concentration, barriers to entry, and shares flowing to the most efficient fishermen, who often are the largest operations. These outcomes have one thing in common, however: they are the result of the market that is created for the fishing privileges. Pr oblem Statement In establishment of these programs, a new market for a new good is created, and this market is the primary mechanism through which management goals are expected to be achieved. For example, maximized economic efficiency of the fishery is ex pected to be reached through the trading of shares but can only be achieved via a well functioning trading market; in other words, markets should serve to facilitate movement of privileges to fishermen who value the privilege more (Newell, Sanchirico, and Kerr 2005; Tietenberg 2002), such as those with lower harvesting costs. Studies on markets for transfer able fishing privileges can be fo und in the literature, but information is limited about how these markets develop over time, despite the importance of m arket activity in achieving objectives. While there are many studies that

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26 focus on how transferable fishing privilege programs specifically outcomes of market activity affect the fishery, there is little research on how fishery characteristics, such as the role of social and spatial characteristics of the fishery and program specifications affect the markets. In many programs such as the Florida spiny lobster trap certificate program, the New England multi species sector program, and the Gulf of Mexico Red Snapper IFQ program, the market is not formally facilitated by the managing agency and the fishermen make the transfers on their own. So, w ith everything that is required to carry out a transaction, f rom finding a buyer or seller to deciding on a price to finalizing the sale there is little know n about how fishermen negotiate sales and what kind of information they consider to make decisions in the marketplace. Lastly, there is little information about how the social ties in fishing communities affect tr ansactions, despite the importance of communities in many U.S. fisheries. Markets for transferable fishing privileges are essentially exchange networks, and can be analyzed as social networks. The social relations of individuals participating in a market are the means of sharing information not just concerning pricethat would let buyers and sellers better align their interests (Podolny 2005). A social network analysis could reveal not only who is trading with whom, but it will also help identify groups, ev aluate the network structure, and examine how position within the network plays a role in certificate transfers. In a market, the resource flow is determined by accessibility to a potential partner in the exchange (Cook et al 1983; Burt and Talmud 1993). If the market structure is fragmented, disconnected groups will emerge (Burt 2004), in which the space in between is called a structural hole (Burt and Talmud 1993). An individual occupying a

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27 structural hole thus has access to information from the separat e groups to whom he/she is connected (Burt 2004). This can be an advantage, such as for stimulating creativity in a workplace (Burt 2004), or in the case of an exchange network, access to information about prices and environment (Bonacich 1987). They can also be important in the overall network structure. Power, or in this case bargaining power within an exchange network can be evaluated on the connections an individual has, and how those individuals are connected; this translates as, in general more power comes from being connected to others with power (Cook et al 1983). The the oretical foundation in social network analysis has not often been utilized in fisheries social science research, and specifically the literature is sparse on studies that use the t ool to examine markets for transferable fishing privileges. Objectives The overall objective of this dissertation is to examine how a market for transferable fis hing privileges develops over time if left to fishermen to exchange informally, and how factors rarely incorporated into economic studies such as social, spatial, and management provisions, can affect the market. The research focuses on the Florida spiny l o bster trap certificate m arket, created from a transferable effort share program implemented i n 1993 for the Florida commercial spiny lobster trap sector. The specific objectives of this study are: 1) to examine a market for transferable fishing privileges over time and evaluate social and regional trades; 2 ) to determine the factors that affect in dividual transaction share prices, including geography, ethnicity, program provisions, and market position;

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28 3 ) to test if trades are correlated with spatial and cultural ties among the fishermen ; and 4 ) to examine how distribution of shares has changed ov er time and the role of brokers in the market network The information learned from completing these objectives will be used to develop a summary of key program elements and recommendations for future programs. Outline and Methods The dissertation is organized into four papers that each addres s one of the above objectives. The research design uses an interdisciplinary approach, utilizing several methods of data collection and analysis. I obtained data on all lobster trap certificate transfers completed sinc e the beginning of the program, including names and addresses of buyers and sellers; price; quantity of certificates; and surcharge fees. I used this information for the social network analysis, in the price model, and for the distributional analysis. I al so conducted indepth interviews with fishermen on participation in the market to guide hypotheses and complement interpretation of the results of each analysis. Chapter 2 Chapter 2 presents the first paper, in which I will use social network analysis to e xamine the trap certificate market. The entire trading history and several fishing seasons are analyzed as social networks and visualizations are generated to show how the market changed over time. Additionally, I will include spatial and cultural attribut es along with the network metric betweenness to look for patterns in the network

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29 Chapter 3 In the second paper, I will estimate a price model to determine how program provisions and soc ial factors influence certificate prices, which can be used as a si gnal of market function. Because the prices have not stabilized and continue to fluctuate in the trap certificate market, a regression analysis of the transfer data can identify factors that are correlated with price variations including program provisions, location s of buyers and sellers position in the market based on market experience and trade partners and social fishery characteristics. Several hypotheses will be tested in this paper including : Certificate prices have increased over time, reflecting the increased value of the fishery with reduced effort levels and guaranteed shares ; Certificate prices are lower in transactions with more certificates since lower prices are associated with bulk sales ; Certificate prices are higher in transactions w ith more type B certificates because these certificates do not incur transfer fees ; Certificate prices are higher in years with active reductions as active reductions put the seller in a better bargaining position ; Certificate prices are lower in years with passive reductions, as passive reductions put the buyer in a better bargaining position; Certificate prices are lower in transactions between two fishermen from the same area, because it is easier to trade with someone living in close proximity than someone living in another region, which lowers the transaction costs ; Certificate prices are lower in transactions between two Latino or two nonLatino fishermen as it is easier to trade with someone who speaks the same language than someone who speaks a different language, which lowers the transaction costs; Certificate prices increase as difference in constraint, a network metric, increases reflecting differences in the position in the market for the buyer and seller;

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30 Certificate p rice s are higher for transactions with a broker as the buyer and certificate prices are lower for transactions with a broker as the seller, reflecting higher and lower transaction costs, respectively, of brokered transfers. Chapter 4 In the fourth chapter, I will test i f trades are correlated with spatial and cultural attributes Using the transfer data, I will analyze the transfers u sing social network analysis and Quadratic Assignment Procedure (QAP) correlation. QAP is a tool that compares matrices; for this paper I w ill compare the exchange network (market for lobster trap certificates) to attribute networks (based on the attributes Area and Ethnicity) to test the following hypotheses: transfers between fishermen from the same area have occurred more frequently than t ransfers between fishermen from two different areas; and transfers between fishermen of the same ethnicity (both Latino or both nonLatino) have occurred more frequently than transfers between one Latino and one nonLatino Chapter 5 In Chapter 5, I will ex amine how geographic distribution of certificates has changed over time, specifically how certificates have moved around the fishing area (Miami, Upper Keys, Middle Keys, Lower Keys, and Key West ) T he first goal of this paper will be to examine how the nu mber and percentage of certificate s in a region has changed as a result of trades. I will analyze transfer data and certificate holdings over 17 years to examine the net inflow (via transfers) into and between the regions in the primary fishing area, and t o evaluate how the market has allowed for redistribution of shares.

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31 In Chapter 5 I will also discuss the role of brokers in the trap certificate market, an idea suggested by the network visualizations and interview data, and supported further with the results of the price model. Chapter 6 The final chapter provides overall conclusions and suggestions for how this research could be used in fisheries management for the Florida spiny lobster fishery, and other fisheries under or considering transferable fis hing privileges. Summary In a paper on the pros and cons of ITQs, Gibbs (2009) used as part of the title Its all in the T, in reference to transferable in Individual Transferable Quota. Indeed, the transferability aspect of privileges based manageme nt for fisheries is the key to achieving management goals, such as reducing overcapitalization and maximizing efficiency, but it is also the mechanism by which negative social outcomes may occur and impact fishermen and fishing communities especially if t he market is unstructured, informal, and unfacilitated. Trade offs are unavoidable in fisheries management, but the debate over transferable fishing privileges also highlights the importance of social factors involved. This dissertation focuses on several aspects of the market for Florida spiny lobster trap certificates and the spiny lobster commercial trap fishery to examine how the market has developed over time and how fishery characteristics play a role in the trap certificate market. I will use social network analysis to explore the market as an exchange network, along with several network metrics in a price model, QAP correlation analysis, and analysis of the distribution of certifications. I will also consider program provisions and spatial and cultural characteristics of the fishery to evaluate the market.

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32 Lastly, I will identify individuals acting as brokers in the market and assess how their role in market has affected the program.

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33 CHAPTER 2 USING NETWORK VISUALIZATIONS TO EX AMINE THE MARKET FOR SPINY LOBSTER TRAP CERTIFI CATES Network visualization is a useful tool to conduct an overview examination of a network and allow s the researcher to visualize the complex relationships that make up networks, especially in those with a high number of ties and participants (Perer and Shneiderman 2008). By focusing on a graph of the network, past studies have shown that visualizations may help to identify key people (McCarty et al. 2007), reveal clusters and highlight patterns that are not evident in statisti cal analysis of the data (Perer and Shneiderman 2008), and serve as a way to develop insight of network structure and communicate network research to others (Freeman 2000). Network visualizations have been used as exploratory tools to help explain results from interviews or statistical analysis in studies on diseases (Perer and Shneiderman 2008), personal network analysis (McCarty et al 2007), and communication patterns via email (Puade and Wyeld 2006), and to show evolution of supply chain networks over t ime (Galaskiewicz 2011). The purpose of this chapter is to use network visualizations of the spiny lobster certificate market to examine the market using the entire history of transactions, and to conduct a more detailed analysis of several fishing seasons. This is the primary analysis using the transfer data. Because the trap certificate program has been established for 17 years, I expect trades to be numerous at first and in years of active reductions (explained in detail in the next section) but slow down as fishermen reached optimal operation size and an equilibrium was reached in share distribution, which should be represented in visualizations by fragmentations and decreasing network density (low numbers of individuals and ties). Because t he spiny lobster fishermen are not a

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34 homogenous group culturally or geographically and participants are distri buted throughout both coasts of Florida, I expect there to be fragmentation based on location and ethnicity (Latino or nonLatino) Specifically in the Miami area and the Florida Keys there are specific Anglo and Hispanic groups, and the fishermen work in a deeply rooted cultural and social system I expect these to be reflecte d in the network visualizations and I include attributes on location and ethnicity i n the social network analysis. Lastly, I also use the network metric betweenness to capture market position that may be beneficial for fishermen transfer ring lobster trap certificates and to examine if there are key individuals in the network, which will help me identify brokers, a common occurrence in markets for transfer able fishing privileges (Newell, Sanchirico, and Kerr 2005). Research Context The Fishery The Florida spiny lobster fishery is one of the most economically important commercial fisheries in Florida, targeting Caribbean spiny lobster ( Panulirus argus ). Lobster are caught commercially using mostly traps, but there are some commercial divers in the fishery Over 90% of the lobster landings are reported from the Florida Keys and around Miami (Data source: Florida Wildlife Conservation Commission; Figure 2 1 ) ; these areas are also known to have differences in fishing behavior, markets, and environment Additionally, the fishery is characterized by two distinct cultural groups, referred to in this paper as Latino (primarily Cuban Hispanic fishermen) and nonLatino (usually White Anglo fishermen). The regional and cultural variation in the fishery is documented (MacLauchlin 2006; Shivlani et al 2004; Shivlani 2009) and recognized by state and federal fisheries management (SAFMC/GMFMC 1982).

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35 The Lobster Trap Certificate Program In 19 93 the Florida spiny lobster trap certificate program was created through the South Atlantic and Gulf of Mexico Fishery Management Councils in coordination with (what is now) the Florida Fish and Wildlife Conservation Commission. The program was designed to addr ess a variety of issues, including reducing the number of traps in order to stabilize the fishery, increasing yield per trap, increasing industry rents, reducing crowding and damage to bottom habitat, and maintaining or increasing overall catch levels (Milon, Larkin, and Ehrhardt 1999). To control and reduce the number of lobster traps, spiny lobster fishermen were required to hold one trap certificate for each lo bster trap fished. About 750,000 c ertificates were initially allocated based on landings history, but management also allocated ten certificates to lobster endorsement holders who had very low or no reported landings in the qualifying period. To decrease t he overall number of lobster traps, active and passive reductions were implemented at different periods in the program. The first reduction in the first year of the program was active in which 10% of ce rtificates held by each fisherman was reverted back to the state (i.e., an individual holding 2,000 certificates would hold 1,800 certificates at the beginning of the next year after a reduction occurred). There were additional active 10% reductions in 1995, 1996, and 1999. Starting in 2002, passive reductions became the primary mechanism to reduce effort in the fishery, in which 25% of certificates transferred would be reverted back to the state. Passive reductions occurred thru 2005, and later were again implemented in 2009 when the Florida Fish and Wil dlife Conservation Commission approved a passive reduction of 10% on all nonfamily transfers until the number o f

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36 certificates reaches 400,000 ( Rule 68B 24.009, F.A.C., Trap Reduction Schedule). At this time there are about 450,000 active certificates (Fig ure 2 2 ). As with many other privileges based management programs, participants in the fishery are allowed to transfer (i.e., buy and sell) shares to other participants and newcomers to the fishery This is the means for fishermen to maintain operation siz e during active reductions and enter the fishery without increasing the overall number of traps but the market is unfacilitated in that there is no involvement by the state in assisting buyers and sellers to find one another Some of the larger lobster operations fish as many as 4,000 traps while other fishermen, who likely target lobster for supplemental income, own a few hundred. Because of the initial allocation of ten certificates to any lobster endorsement holder, there are about 300 individuals holdi ng just four certificates (after all the reductions). Fishermen generally consider 1,500 to 2,000 traps as the minimum to make a living from lobster harvest. When there was an active reduction, a fisherma n had to purchase additional certificates in order t o continue fishing the same number of traps as before. In order to encourage intergenerational trading and support family businesses, some transactions do not incur the required transfer fees of $5 per certificate or 25% of the total sale price. Additional ly, certificates that have already been transferred outside of the family do not require transfer fees. To keep track of which transferred certificates required transfer fees, certificates are identified as Type A1 (never transferred), Type A2 (transferred within family), and Type B (transferred at least once outside of family). Thus, transaction characteristics vary in part based on the different certificate type(s) being transferred and associated fees.

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37 Additional effects on the fishermen and fishing comm unities have been noted in socioeconomic studies following establishment of the program. A study conducted three years after the start of the program noted some changes in the fishery. Shivlani and Milon (2000) reported that the traditional system of worki ng up to captain status, a type of apprenticeship system that is particularly important in knowledge development of the next generation of fishermen, had been eliminated due to the availability and additional capital required to purchase trap certificates. These and other factors, such as losing members of the industry to other fishing sectors, gentrification of the Florida Keys, and loss of cooperative social networks, contributed to what the surveyed fishermen noted as a changing landscape in the fisher y and the loss of presence of commercial fishing in some areas of the Keys (Shivlani and Milon 2000; Shivlani 2009). These social characteristics of the fishery new entrants, social ties in communities, loss of fishing presencehighlight their importance i n the fishing communities. This paper will incorporate these characteristics into network visualizations to examine the trap certificate market and test my hypotheses of fragmentation based on location and ethnicity. Additi onally, because this is an unfaci litated market, I will use the network metric betweenness to help identify key individuals who may have played a role in brokering or informally facilitated trades. Methods Data Fishery data were provided by the Florida Fish and Wildlife Conservation Com mission (FWC), the managing agency for the lobster trap certificate program These data include information on over 2,000 transactions of approximately 697, 000 certificates from 19932008, including seller name, buyer name, addresses number

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38 sold, price, f ees, etc Additionally, data were obtained on certificate holdings for each lobster endorsement holder with active certificates from 19942008. This information included name, address, and number of active trap certificates for each year. I used these data to explain some of the results by looking at certificate holdings of specific individuals to assess if and when these fishermen (essentially) exited the fishery by selling all certificates. The data were entered into an adjacency matrix using social network analysis software. Table 21 shows the total numbers of nodes and ties, and the numbers of buyers and sellers in each network visualization presented. Every transaction is represented by one tie in the network, and the buyer and seller are the nodes. A ttributes for each individual were added to the data. These included location based on the fishermens residential address, which was coded as: Miami Area, Upper Keys, Middle Keys, Lower Keys, Key West, and Outside (for those residing outside the primary f ishing areas ). These distinctions are commonly used in south Florida in reference to the different places.1 An attribute of Latino or nonLatino was also added for each person based on last name.2 Table 2 2 shows the number of nodes for Latino and nonLati no, and the distribution of nodes for each area in each of the following network visualizations. Social Network Analysis Social network analysis uses information about how people are connected. These relationships can be based on whom you know, to whom you are related, with whom 1 The designations are used by residents and also by the U.S. Census Bureau since 1970 (Shivlani 2009). 2 This method follows the same method used to identify Hispanic lobster fishermen in the Florida Keys in the 1980s (Bill Sharp, personal communication, 2009).

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39 you collaborate on projects or work, or with whom you are involved in an exchange, to name a few examples ; anything that ties two people together can be used in social network analysis. The spiny lobster trap certificate market repr esents an exchange network Information on ties (or links) between two individuals creates an adjacency, or peopleby people, matrix where the transaction is a link and the buyer and seller are the two individuals Figure 2 3A shows an example of a matrix representing four participants in a market. A 1 indicates the presence of a tie between those two people (i.e., a transaction was carried about between these two individuals) and a 0 indicates the absence of a tie. These data are entered into social network analysis software; for this study, I used Ucinet (Borgatti, Everett, and Freeman 2002) The tie s, which for this paper are defined as certificate transfers, between people form a structure, and this can reveal an abundance of information about a social system or a community through visualization of the network; Figure 23B shows an example visualization based on the matrix in Figure 23A. For this paper I generated visualizations of the market to get a generalized, birds eye view of the market. T he visualizations were generated NetDraw, a tool in Ucinet. Visualizations use algorithms to calculate distances and placement of the nodes, and are a useful way to present information about the networks. In a visualization, every node (dot) represents a f isherman and every line represents a tie between them, indicating that these two individuals have traded with one another at least once. The social network analysis software was used to calculate a measure of betweenness for each node. Betweenness is a m easure that is calculated by the

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40 number of shortest paths between all other nodes that the node is on (Hanneman and Riddle 2005; Scott 2000) In other words, high measures of betweenness means that these individuals may control the flow of certificates by having the most ability to cut off flow between two other individuals. I used network visualizations to test the hypothesis that frequency of transfers would decline over time and after active reductions, as fishermen held sufficient numbers of certificate s to maintain operation size and no longer participated in transfers. I also added node colors to represent different locations and node shapes (circle and square) to represent ethnicity in the visualizations to examine how social characteristics were ref lected in the trap certificate market ; I expected fragmentation to be evident in the visualizations. Lastly, betweenness was represented by node size in the visualizations, which would immediately indicate key individuals (and possibly brokers) participati ng in the trap certificate market. Results All Seasons (19942008) Figure 24 is a visualization using every transaction from 19942008 ( n = 2 ,217 ) ; this was my first network examination of the trap certificate market. The visualization shows that this is a very complex and active market. More importantly, the nodes are not in just pairs, or even in small groups, but very much connected to one another. This suggest s that the fishermen who have participated in the market have bo ught and sold many times over. The relatively large size of the network due to the numerous transactions and individuals participating in the market over 17 years has the potential to obscure

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41 changes over time. I next selected six fishing seasons ad hoc in order to analyze in detail t o look for patterns in the visualizations and provide an overview of how the market may have changed over time. First Season (199319 94) Figure 25 show s the first fishing season of the tra p certificate program The nodes, which represent the fishermen, are color coded to indicate where the fisherman lives and square nodes indicate Latino, circles indicate nonLatino. The size of the node indicates the value of betweenness The nodes with the highest measures of betweenness are the three large red square nodes and the large black square in Figure 25 The transfer data indicate that these are three Latino fishermen living in the Miami area and one Latino living outside the study area. One interesting thing about this network is the strand of nodes coming f rom that central group in Figure 25 Especially starting with the white square node, the chain is buyer seller buyer seller, etc. This represents the movement of a certificate through 11 fi shermen during only one season. This suggests that the 199394 mar ket is a very active and recycling market. Third Season (1996 19 97) When examining the visualization generated from transactions during the third season of the program (Figure 26 ), it is immediately noticeable that it is less dense, since there were few er t ransactions during this period. Another prominent characteristic of this network is the presence of the large stars in the middle of the visualization. From the transfer data, the large node labeled 1 in Figure 26 represents an individual who part icipated only as a buyer, and who is from outside of the Keys (north central

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42 Florida). He is possibly a retiree or person with a second home in the Keys, which is not uncommon in the spiny lobster fishery. The la rge node labeled 2 in Figure 26 is an ind ividual who participated as a buyer and seller several times. The interesting thing about this person is that almost all of his transactions as a buyer involve purchases of seven certificates, but his activity as a seller involves bulk transactions. This s eason was the third active reduction of the program, which left any fishermen originally allocated ten certificates with only seven. Fishermen with such small operations perhaps considered the benefits of fishing only seven traps were not worth the costs, and chose to exit the fishery. The individual who bought out the small certificate holdings all of these exiting fishermen and sold in bulk back to new entrants or existing fishermen contributed to the expected consolidation of the fleet (e.g., buying out 20 certificate holders with 50 certificates each and reselling 500 certificates each to two certificate holders). Sixth Season (19981999) Figure 27 shows the network visualization of the 19981999 season, the sixth year of the trap certificate program. This was also a busy market and there are some nodes with larger values for betweenness, who are the same individuals that began participating in the market in the previous example (Figure 26). Additionally, these nodes are connected, at least indirectly, to one another, which suggests that there was trading between some of the more frequent participants. There is also an individual, sho wn in the middle of the diagram who is connected to many other nodes that are not connected to one another. Examination o f the transfer data indicate that this fisherman

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43 purchased small numbers of certificates from many individuals, often buying them out.3 Many of the sellers are from outside the five study areas (black), indicating either ties with fishermen in other part s of the state or some means to contact them to purchase certificates. Eighth Season (2000 2001) The 200020 01 season had the lowest number of transactions since the beginning of the program, which is evident by the low density of this network (Figure 28 ) This season also had the lowest landings (Data source: FWC) and the highest average certificate price since 1993, according to the transfer data. The nodes on the right have the highest measures of betweenness, but what is most interesting about this network is that there are so many dyads (two nodes, one tie). This is unlike multiple transactions and dense sub networks in previous examples. The majority of the transactions are one time only, versus the recycling or chains indicating continual buying and selling via several fishermen. Eleventh Season (20032004) Figure 29 shows the network visualization from the 2003 2004 season. The landings are started to increase again after the low point in 200020 01 (Data source: FWC) but there are still a lot of dyads (two dots, one tie) instead of the strings in the first few seasons. Noticeable t here is a lot of activity in Key West ( purple). Key West actually has reportedly experienced a decline in the number of lobster fishermen in the area. A socioeconomic study in 2004 ( Shivlani et al 2004) found through interviews that 3 Using the certificate holdings data, this information was verified by specifically looking at the original certificate holdings records for these individuals to tell if a fisherman sold all certificates and did not buy cert ificates again at a later time, therefore exiting the fishery.

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44 Key West fishermen out of all the study areas are dealing with loss of fish houses, dockage, and rising costs of living due to urbanization and growing tourism. According to the transfer data and certificate holdings data, the individual represented by the one large pink circle is a fishermen buying out a lot of other Key West fishermen who are exiting. Fifteenth Season (20072008) The final example season is from 20072008 (Figure 210) This visualization indicates that the market has picked up, recycling again like the markets from the early years. There are more strings and less dyads in this market. The number of fishermen from outside the five study regions (black nodes) is incre asing ; this may indicate that more individuals entering the fishery as the landings become stable again. There are also several large yellow square nodes, indicating a substantial presence of Latino fishermen from the Upper Keys in the market. There is anecdotal evidence that the Latino fishermen population is increasing in this fishery, with reports of as much as half the fleet (crew and captains) of Cuban descent. As the Latino fishermen gain more presence in the fishery, it is expected that their presence in the trap certifi cate market would also increase (see Knapp ( 2011 ) for a similar situation with Alaska salmon permits). Summary In this chapter, I used network visualizations of the trap certificate market to look for patterns, key individuals, and to test if location and ethnicity were reflected in trades. Visualizations were useful for this analysis in that they provided way to examine the relatively large number of transactions and participants in a graphic representation, in which colors, shapes, and sizes of nodes highlighted important features of the market.

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45 First, the complete network (Figure 24) was complex and showed multiple transactions between fishermen, which suggested that these multiple transactions may occur within social and cultural g roups (i.e., people a fisherman may already know ) While this visualization captured a large amount of information by incorporating 17 years of data, it was useful to show that the overall market is not as fragmented as I expected. The seasonal examples al so suggested that there may be brokers in the market, another component I was able to explore further in interviews with the fishermen. It also highlighted important characteristics, such as the stars or strings that were evident in the visualizations With a birds eye view of the market, I was able to identify unexpected patterns in transactions that were not evident by simply examining the transfer data. The network visualization also indicates that some fishermen have participated multiple times in the certificate market, adjusting their operation sizes. Past studies noted that certain study areas have been subjected to rising costs of living, loss of dock space and fish houses, and urbanization; these external factors may have affected business deci sions for the fishermen. Additionally, fluctuations in landings, environmental factors, and additional regulations may influence decisions to exit the fishery or to adjust the number of traps fished. As transferable fishing privileges used in fisheries becomes increasingly common in both the U.S. and around the world, it also becomes more important for scientists and managers to gain a better understanding of how the markets created by these programs function. Potentially, the social and cultural system of the fishery can affect the market

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46 and the outcomes of the program. It is imperative to understand how fishermen interact, and also how they do not interact, in order to design a proper system for trades to occur if success of the program is dependent on t rades occurring. Network visualization is a tool that can be used to examine a market for tradable fishing rights from a unique point of view. The analysis can provide insight to how the market is working and who is trading with whom. This information may lead to a better understanding of this type of fisheries management, and improve design of new programs and adaptation of existing programs The results of this analysis of network visualizations guided the next three chapters of the dissertation. The an alysis also helped generate questions for interviews with the fishermen, including: Why do fishermen buy and sell certificates so often and multiple times? How do you find a buyer or seller? Did you know the buyer/seller in the transaction(s) that you part icipated in beforehand? If so, how did you know him/her? (neighbor, family, friend, etc.) Is it more common for people to buy certificates from someone nearby? Is it more common for people to buy certificates from someone of the same ethnicity? Are there brokers in the trap certificate market?

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47 Figure 21. Map of the study regions in south Florida and the Florida Keys

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48 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 # of Active Certificates Fishing Season Figure 22. Number of active lobster trap certificates over time Figure 23. An example of soc ial network analysis. A) Example adjacency matrix ; B) corresponding visualization of the network

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49 Figure 24. Network visualization of all lobster trap certificates transactions from 1994 through 2008

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50 Figure 25. Network visualization of certificate transfers in 19931994 season

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51 Figure 26. Network visualization of certificate transfers in 19961997 season 1 2

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52 Figure 27. Network visualization of certificate transfers in 19981999 season

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53 Figure 28. Network visualization of certificate trans fers in 20002001 season

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54 Figure 29. Network visualization of certificate transfers in 20032004 season

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55 Figure 210. Network visualization of certificate transfers in 20072008 season

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56 Table 21. Total nodes, total ties, and number of buyer and sel lers in each visualization Total nodes Total ties # Buyers # Sellers All seasons (1994 2008) 1,689 2,098 716 1,404 First Season (1993 94) 355 242 169 193 Third Season (1996 97) 430 354 133 318 Sixth Season (1998 99) 263 208 89 172 Eighth Sea son (2000 01) 118 77 67 59 Eleventh Season (2003 04) 193 122 96 107 Fifteenth Season (2007 08) 158 106 88 77

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57 Table 22. Total number of nodes for each ethnic designation and region Latino Non Latino Miami Upper Keys Middle Keys Lower Keys Key West Outside All seasons (19942008) 463 1,226 274 199 366 298 206 346 First Season (1993 94) 117 236 64 33 100 74 36 46 Third Season (1996 97) 88 342 55 64 81 95 29 106 Sixth Season (1998 99) 47 216 38 40 47 27 28 83 Eighth Season ( 2000 01) 36 82 17 17 34 28 5 17 Eleventh Season (2003 04) 53 140 27 19 43 38 39 27 Fifteenth Season (2007 08) 65 92 32 28 56 16 17 18

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58 CHAPTER 3 FACTORS AFFECTING NE GOTIATED PRICES IN A MARKET F OR EFFORT SHARES IN THE FLORIDA SPINY LOBSTER FISH ERY Transferable fishing privilege systems are increasing worldwide in an effort to use economic incentives to rationalize fleets. Every program is set up with specific economic or ecological goals, but to reach these objectives the market for the effort share, tradable permit, or catch share must function efficiently. Several studies have examined the dynamics of transfer markets with the majority of the emphasis on whether markets have reached equilibrium (Anderson and Sutinen 2005; Connor and Alden 2001), allowed for the capture of resource rents (Newell, Sanchirico, and Kerr 2005), or the role of historic dominance (e.g., Armstrong 2008), yet little is known about how fishermen make transactions happen. With everything that is required to carry out a trans action from finding a buyer or seller to deciding on a price to finalizing the sale little is known about how fishermen negotiate sales and what kind of information they consider to make decisions in the marketplace. At the beginning of a program, the m arket is characterized by highly dispersed prices, likely because fishermen are just getting used to the system and the value of the share is not immediately clear (Kerr, Newell, and Sanchirico 2003; Newell, Sanchirico, and Kerr 2005) Eventually, prices ar e expected to reach an equilibrium (Anderson and Sutinen 2005). Stabilization of prices does not necessarily mean that price stays constant, but more that price will stay consistent depending on valuation of the share (Knapp 2011) after price dispersion decreases. When there is a consistency, share prices can be used as complementary information to other fishery data, such as information about the stock

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59 (Arnason 1991; Batstone and Sharp 2003). As a reflection of the fundamental value of the share, prices will fluctuate or stabilize with the present value of the expected future profits from fishing (Anderson and Sutinen 2005; Arnason 1991; Batstone and Sharp 2003; Newell, Sanchirico, and Kerr 2005; Milon, Larkin and Ehrhardt 1999). In this way, when there are changes in share price, this may indicate changes in the status of the stock, the market, or some other factor that would affect the fishery. In many fisheries managed under transferable fishing privileges price data are limited due to unreliable or inadequate information. It is not uncommon for there to misreporting or inclusion of nonmonetary items in the exchange, such as gear or labor (Kerr, Newell, and Sanchirico 2003; Lindner, Campbell, and Bevin 1992). In the absence of data, there are still c onditions that describe how a market for transferable fishing privileges is functioning. Connor and Alden (2001) reported that markets function best when there are hig h numbers of buyers and sellers, available and quality information to buyers and sellers and low transaction costs. In fact, low transaction costs are linked to the number of available market participants and to available information on prices and market activity for the participants, all of which can affect efficiency and ability of the mark et to contribute to reaching management goals (Hahn and Hester 1989; Newell, Sanchirico, and Kerr 2005). Information is particularly important, referred to by Connor and Alden (2001) as the life blood of markets and market part icipants need information about pricing and expected profitability of the stock to make the best decisions in the marketplace (Arnason 1991; Newell, Sanchirico, and Kerr 2005).

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60 Because markets are made up of people and exchanges, they can be analyzed as social networks. When fishermen participate in a market, they share not only price information but other information about the fishery and the value of the share (Podolny 2005). Flow of whatever is being exchanged in the network is determined by accessibility to a potential partner, without which exchange could not happen (Cook et al 1983; Burt and Talmud 1993). Flow can be interrupted if the market structure is fragmented, and disconnected groups will emerge (Burt 2004). The space in between these groups is called a structural hole and this can be a beneficial position (Burt and Talmud 1993), as individuals occupying a structural holes may have access to information from the separate groups to whom he/she is connected about prices and environment (Bonacich 1987; Burt 2004). While studies on markets for tradable fishing rights can be found in the literature, there has been no research on the role of social and spatial characteristics of the fishery and program specifications in these markets. Achievement of the economic and ecologi cal goals of these programs depends on trading of the quotas or permits and the ability of the market to facilitate trading, a market that is assumed to function on basic economic principles. However, these markets are unique in several ways, particularly in that each market is tied to an unpredictable resource base, is initiated and structured by a variety of agencies with distinct protocols, andin many cases is affected by a deeply rooted social and cultural system among the fishermen. These factors ensure that such markets are inherently variable, contribute to the riskiness of the industry and complicate fishermen decisions.

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61 The Florida spiny lobster trap certificate program is an established transferable fishing privilege program used to control and r educe effort in the Florida spiny lobster commercial fishery. Although the program has been in place for over 17 years, the price for an individual certificate has been and continues to be widely dispersed. While the market is active, prices have not stabi lized as expected, indicating that other factors may influence negotiated price in transactions. For this paper, I will estimate a price model using certificate transfer data to determine how program provisions and soc ial factors influence prices for lobs ter trap certificates. The trap certificate program included provisions to achieve trap reduction goals and to minimize some expected social impacts. Additionally, I will focus on how the Miami area and the Florida Keys (from where over 90% of landings are reported) are spread out over 150 miles, and the fact that the fishery is made up of two distinct ethnic groups (Latino and nonLatino) to examine how location and sociocultural differences affect transaction costs for certificate transfers. Lastly, I wil l use a social network measure called constraint to look at how experience and position in the market network can affect negotiated price s for lobster trap certificates The Florida Spiny Lobster Commercial Fishery and the Trap Certificate Program About 9 0 95% of the commercial catch is landed in the Miami area and the Florida Keys, almost all with standardized trap. The lobster fishery has two distinct social groups, which I will refer to as Latino and non Latino. The former is mostly Cuban fishermen, who dominate the Miami area and also work in Key West, and the latter is mostly Anglo White fishermen, who are prominent in the Upper and Middle Keys (Shivlani et al 2004). Anecdotal evidence suggests the division is based partly on language and cultural bar riers (MacLauchlin 2006).

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62 The trap certificate program for the Florida spiny lobster fishery was established in 1993 under Florida Statute 370.142(1) with the stated goal of the program to reduce the number of lobster traps (i.e., commercial fishing effor t). From 1960 to 1990, the number of traps increased from 100,000 to over 900,000, but landings remained stable between 5 8 million pounds each year (Milon, Larkin, and Ehrhardt 1999). Reducing the number of traps was intended to address concerns of effici ency in addition to issues of crowding and user conflict and habitat damage, however, a reduction target was not specified at the start of the program (Larkin, Milon, and Ehrhardt 2002). For this program, a fisherman is required to have one trap certific ate for every trap he/she intends to use to catch lobster commercially. Certificates must be bought from one or more other lobster fishermen since new certificates are not being issued. Once the certificate is recorded as being held by a fisherman, he/she purchases tags from the state. These tags vary in color and/or size each year and are imprinted with the corresponding certificates information and must be attached to the traps while in use. The trap certificate program also includes a number of provis ions that affect transfers, including restrictions on share ownership, the right of the state to revoke certificates to reduce total fishing effort, and fee waivers on transfers within families. Reductions in the total number of certificates available have occurred over time. The most aggressive reductions occurred in the initial years of the program when total certificate holdings of each individual were reduced by 10% in three successive years and again in 1999. These reductions were referred to as activ e reductions. Passive reductions, those that only apply to transfers to between nonfamily members, were implemented later on. Passive reductions were set at 25% (i.e., buyer pays for 100

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63 certificates but only receives 75). Both active and passive reduc tions were discontinued in 2005, but a 10% passive reduction was reintroduced in July 2009 with a goal of reducing trap numbers to 4 00,000. Active and passive reductions have reduced total trap numbers to about 450,000. Fishermen claim that the projected increase in catchper unit effort that was used to justify the program has not materialized (Shivlani et al 2004). In order to protect family businesses and encourage intergenerational fishing, no fees are imposed on transfers between immediate family members.1 To keep track of this, each certificate is classified as Type A1, A2, or B. All certificates were Type A1 when they were issued by the state during initial allocation. Upon transfer, certificates become either Type A2 or Type B. A Type A2 certificate was transferred between immediate family members. A Type B certificate has been transferred outside of the family and may also have subsequent transfers. Transfer Data and Trade Information Transactions Data The Florida Fish and Wildlife Conservation C ommission provided the records of every transfer that has occurred from 19932010. This information included the date of the transaction, total price paid, and quantity of each type sold (A1, A2 and B). The records also included the names and addresses of the buyer and seller. Fishery wide information on the total number of certificates available, total number of certificate owners, annual landings and dockside prices were also obtained. 1 A surcharge of $5 per certificate or 25% of fair market value (the reported price for the transaction), whichever is highest, is charged to first time non family transactions in order to cove r administrative costs and recover resource rents for the Florida public.

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64 Since the beginning of the program there have been over 2,400 transactions and almost 750,000 cert ificates transferred (Figure 31 ). The numbers of transfers and of transferred certificates were highest at the start of the program, as would be expected, and dropped drastically in 2000. Since 2005 the number of transfers has stabilized at about 100150 per year, and the number of certificates transferred annually is approximately 50,000. Spiny lobster landings decreased sharply during 19992001 and had little recovery in the following years (Figure 32 ); this decrease has b een attributed in part to a virus affecting the juvenile population (Behringer, Butler, and Shields 2008). As landings increased somewhat in 2002, market activity appeared to increase again. This behavior suggests that the overall certificate market a mech anism to reflect the underlying value of the fishery may be capturing stock information. Certificate prices during the early years were expected to be widely dispersed as fishermen became accustomed to the program and as values fluctuated before the mark et value was realized (Larkin, Milon, and Ehrhardt 2002), but later the prices should have stabilized. The price per certificate was calculated from the transfer data, based on the total certificates transferred divided by the reported total amount of money for which the certificates were purchased. These were adjusted for inflation with 1994 as the base year and ranged from $0 to $65. Figure 33 shows reported prices over time, and indicates that wide variability continues. Prices were very low in the firs t few years, but within the first six years there is wide dispersion. Reported prices continue to range from $0.10 to $30 per certificate even in the later years. Average reported prices

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65 in each year peaked in 2001 at about $20, and have evened out in the last few years at about $15 (Figure 3 4).2 Social N etwork Analysis I used the transfer data to examine the market as a social network to identify brokers. Transfers were processed and imported into U cin et, social analysis software program (Borgatti, Everet t, and Freeman 2002). For each transfer, I calculated two network metrics for the buyer and the seller: degree centrality and constraint. Degree centrality simply measures the number of ties for each individual, i.e., the number of other individuals he/she has traded with, from the beginning through the transfers season. I wanted to capture market experience and allow for cumulative transfer partners over time. I also used social network analysis of the trap certificate market to examine the effect on net work position on certificate prices. For this model, the network measure I used was constraint Constraint is an index (0 to 1.5) that is measured based on Burt (1992:55), in that C = (pij piqpjq, q i, j), where pij equals the direct ties from i t o j piqpjq is the sum of the indirect ties from i to j by means of q It essentially measures for each person p (called ego): the number of ties that ego p has to other people ( i and j ) (pijpiqpjq ) with persons ( i and j) that have ties to another person ( q) to whom ego p does not have ties ( q i, j) and is connected through only through person q s ties. The lower the 2 Reported prices may not be accurate due to the possibility of the transaction including other dimensions not captured. If so, prices reflect a lower bound estimate of the true valu es.

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66 constraint measure, the less the individual is constrained by his network. For example, a person with t ies to two disconnected subgroups within a network is less constrained, and has more options and less redundant informant, than a person whose ties are all limited or all densely connected. Burt (2004) also used the constraint measure to evaluate how inf ormation can be used by a person with low constraint, particularly one who is connected to groups that are not connected to each other. The results supported his hypothesis that, in a business setting, lower constraint is related to original, good business ideas. Burt speculated that less redundant information and the opportunity to collect and adapt ideas from disconnected groups allowed for new ideas to be generated. I took the same idea, but applied it to the lobster trap certificate market. If the network is fragmented and groups are disconnected, individuals that occupy the spaces between these groups ( structural holes ) will have access to information from these groups that they do not have from one another. For example, a fisherman who has bought or sold certificates from people from several different areas may have the benefit of knowing the market value for the certificate in those places that other fishermen with less market experience may not know. In that way, the experienced fisherman can use h is knowledge to exert bargaining power, and know the options for buying and selling from different sub gro ups within the market network. These two network metrics were used to identify brokers as buyers and sellers in the transactions, as described in the following section. Price Model A single equation price dependent model was specified for this analysis. This specification is assumed sufficient for this initial market analysis since certificates are

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67 unique input; the total number of certificates are fixed each year, the fee to use each is paid each year, and there are no substitutes. So while a system of equations is more typical of input related gear studies, it is not possible to estimate a system in this case. The model estimate has elements of a hedonic specification in that the good is heterogeneous when the spatial logistics of the transfer are considered. In other words, a certificate for sale by a family member living in the same town is not the same as a certificate for sale by a fisherman in anot her area that might not speak the same language. This heterogeneity in the exchange of the good can be captured in the model. A total of 23 explanatory variables were included (Table 31). The explanatory variables are categorized into three types: those reflecting the characteristics of the transaction, the individual buyers and sellers and their relationship, and geographic location.3 Each type will be discussed in turn. Characteristics of the Transaction Each observation used in the model was one transaction of certificates. The characteristics of each transaction that I examined can be separated into those that were based on the season in which the transaction occurred, and those that were unique to the transaction. Fishing year4 characteristics include passive or active reductions during that year. Characteristics of the individual transaction included total quantity sold and percentage of Type B certificates transferred. 3 I compared monthly certificate prices to the dockside lobster price (i.e., inflationadjusted reported price) in Florida and gas prices (i.e., price index for #2 diesel fuel), but there was little relation to price for either of these factors. A ser ies of interactions and basic lag structures also failed to improve model results 4 I use the term fishing year for this paper because the harvesting is permitted August 6 thru March 31, and a year in the lobster fishery includes the last part of one year and the first part of the next. E.g., 199394 fishing year

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68 The fishing year characteristics of the transaction were based on when they occur red. Each season was assigned a number (zero to 16) for the seventeen years (YEAR). I expect ed the price to increase over time as fishermen became more familiar with the program and more convinced that it would continue. I also added two dummy variables t o indicate years when active (ACTIVE) and passive (PASSIVE) reductions were implemented. I expect ed that transactions during years with either type of reductions would increase the value of the certificate, and this would be reflected in the price. The total number of certificates was included for each transaction, ranging from one certificate to 3,798 certificates (QUANTITY). Following microeconomic theory, I predict ed that bulk sales will be associated with lower certificate prices, as there is a certain point in which the overall price for the sale gets too high for the transaction to be carried out. I also used a dummy variable to identify if the transfer included fewer than ten certificates (LESS10). During initial allocation, any person who had landi ngs history and a spiny lobster endorsement was allocated ten certificates. Over time during active reductions, these small allocations decreased and individuals who received the tencertificate allocations can be identified. Because these individuals were likely not year round residents of the study regions and not professional lobster fishermen, they may represent latent effort. Additionally, the transfer data showed that it was common for one person to buy the small allocations from several sellers during one season. I also created a dummy variable for transfers with over 1,000 certificates (MOREK). In addition to my prediction that bulk sales would have lower per certificate

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69 prices, these could also be sales of entire businesses. In the study regions, it is common for fishermen who are exiting the fishery to sell the boat, traps, permits and certificates together. This would require additional capital from the buyer and may result in a negotiated deal for the entire business, which may lower the certifi cate price. I also created a variable that would capture the interaction between the large transactions and quantity transferred (QINTK). Each transaction record included a breakdown of the different certificate types transferred. I calculated the percent age Type B (has transferred outside the immediate family) from the total certificates transferred (PER_B). Type B certificates did not incur the transfer fee, and in general were offered at a higher price, as noted in the section above on interview data I expected that the higher percentage of B certificate in a transfer, the higher the price. Characteristics of the Buyer and the Seller Each transaction has one buyer and one seller. I examined characteristics of each person ( to the extent possible given the data) but I also looked at the effect that similarities or differences between buyers and sellers may have had. These variables were based on spatial, social and network characteristics. The transfer data included addresses for each buyer and seller from which a variable for the location of each person was assigned. Locations were Miami area, Upper Keys, Middle Keys, Lower Keys, and Key West, because these are commonly used by residents in reference to different parts of south Florida. An individual living somewhere other than these areas was labeled as Outside. Dummy variables for each buyer and seller location and seller, with the exception of Outside, were included in the model (SELL_MIAMI, SELL_UPPER, SELL_MIDDLE, SELL_LOWER, SELL_KWEST,

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70 BUY_MIAMI, BUY _UPPER, BUY_MIDDLE, BUY_LOWER, BUY_KWEST). From these regional variables I calculated a dummy variable to identify transactions where the buyer and seller lived in the same area (SAME_AREA). I expect a lower price due to a higher likelihood of the buyer and seller knowing each other prior to the transaction if they lived in the same area; t ransaction costs would be lower for these transfers. From the surnames included in the transfer data, I designated each buyer and seller as Latino or nonLatino using l ast names, as described in Chapter 2. The designation was used to assign a dummy variable for each transaction that occurred between Latino or nonLatino buyers and sellers (i.e., among pairs of buyers and sellers that could be of same ethnicity) (SAME_ETH NIC). Because of the distinct social groups of the spiny lobster fishery, I held the same expectations as for buyer and seller being in the same location, and for prices to be lower for these transactions because transaction costs are lower due to a likeli er pre existing social relationship between buyer and seller While imp erfect, this approach allowed me to preliminarily test whether the observed social group distinctions from previous studies of this fishery may be relevant to the overall market for lob ster trap certificates I used network metrics to examine the effects on price of network placement and to identify brokers. Using social network analysis, I calculated a value for constraint for the buyer and for the seller of each transaction based on t he season in which the tran sferred occurred so that I could capture changes in time as an individual partici pated in the market more often. By using this measure, I hoped to capture the effects of not only market experience ( i.e., number of times a fisherm a n bought or sold trap certificates) but also how position can influence the negotiated price for certificates.

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71 Because management has no involvement in the certificate market and certificate prices are not formally publicized, it is assumed that prices ar e informally negotiated between the buyer and seller. From this, I used the difference between seller constraint and buyer constraint (DIFF_CONS) (specifically, buyer constraint minus seller constraint) so that each measure was unique to that transaction. Thus, if the buyer constraint exceeds the seller constraint, then the measure is positive. If the seller constraint exceeds the buyer constraint, then the value of the difference will be negative. I hypothesized this variable to have a positive coefficient in which case a relatively more constrained buyer would have paid a higher price and, conversely, a relatively more constrained seller would have received a lower price. To identify brokers, I first calculated each individuals degree centrality (number of other individuals he/she had ties with) in the season in which the transfer occurred. I plotted these values against the inverse for values for constraint and where the trendlines intersected was the cut off point to be identified at a broker (seller >25, buyer>35). I used this method because individuals occupying structural holes, i.e., brokerage positions, typically have high network size and low constraint. For the model, I used dummy variables to indicate that the seller was a broker (SELL_BR) and/or the buyer was a broker (BUYER_BR) using these criteria. I expect ed price to be higher for transfers in which the seller was identified as a broker and for price to be lower when the buyer was identified as a broker to reflect transaction costs of brokered transactions. Model Specification The relationship to the certificate price data is:

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72 P RICEi = 1( YEARi) + 2( ACTIVEi) + 3( PASSIVEi) 4( Q UANTITYi) 5( L ESS10i) 6( M ORE Ki) 7( QINTKi) 8( PER_ Bi) 9( S ELL_ M IAi) 10( S ELL_U Pi) 11( S ELL_MIDi) 12( S ELL_ L OWi) 13( S ELL_ K Wi) 14( B UY_MIAi) 15( B UY_ U Pi) 16( B UY_MIDi) 17( B UY_ L OWi) 18( B UY_ K Wi) 19( SAME_AREAi) 20( SAME_ETHNICi) + 21( D IFF_ C ONSi) + 22( S ELL_ B Ri) 23( B UY_ B Ri) where P RICE is the pr ice per certificate, YEAR is a time trend (0 to 16), ACTIVE and PASSIVE are the active and passive reductions, and Q UANTITY is the quantity of certificates in the transaction. L ESS10 indicates the transfer included less than ten certificates, M ORE K indicat es more than 1,000 certificates were transferred, and Q I NTK is the interaction between quantity and large transactions. PER_ B is percentage of Type B certificates. A total of 10 geographic area variables are included; five each for the seller and buyer reg ions: S ELL_ M IA indicates the seller resides in Miami, S ELL_ U P in the Upper Keys, S ELL_MID in the Middle Keys, S ELL_ L OW in the Lower Keys, and S ELL_ K W in Key West; B UY_ M IA indicates the buyer resides in Miami, B UY_ U P in the Upper Keys, B UY_MID in the Middle Keys, B UY_ L OW in the Lower Keys, and B UY_ K W in Key West. The characteristics of the buyer and seller include SAME_AREA, which indicates that the buyer and seller reside in the same area, SAME_ETHNIC indicates they are of the same ethnicity, and D IFF_ C ONS represents the difference between seller and buyer constraints. Lastly, S ELL_ B R indicates that the seller was identified as a broker and B UY_ B R indicates that the buyer was identified as a broker.

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73 Results The price model was estimated prior to the intervi ews with the fishermen. For this section, I first provide the results of the price model and how these corresponded with my predicted outcomes. Then I incorporate the information collected during interviews to corroborate my interpretations and in some cas es, to suggest alternative explanations. This approach allows me to demonstrate how I was able to use the interview data to help better explain the results from the fishermens points of view. The model was estimated using weighted least squares following tests for heteroskedasticity associated with the quantity of certificates exchanged variable. Results from the model are presented in Table 32. Overall, the model explained 30% of the variation in price. Out of the 23 variables, estimates from 19 variabl es were statistically significant, almost all with p < 0.01 The constant indicated a base level certificate price of $10.96 in 1994. As expected, the price increased over time by $1.05 per year. By comparison, active and passive reductions in numbers of certificates (i.e., supply) affected prices even more. In years with active 10% reductions, price increased by $2.06. In years with passive reductions, price was lower by $3.54. This suggests that active reductions place the seller in the power position, and passive reductions place the buyer in the power position. During periods of active reductions, fishermen wishing to replace certificates that were lost to the reduction increases demand. Conversely, when a passive reduction is in place, the buyer knows that he/she will lose a percentage of the certificates being transferred. Perhaps this is used as a bargaining tool to lower the total amount paid to the seller. However, I discuss below how interviews with the fishermen better explained this outcome.

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74 Pr ice decreased by $0.65 with each increment of 100 certificates sold in the transaction. However, I found that the mode for number of certificates transferred was seven certificates, and that transactions of ten certificates or less made up 17% of all trans actions. Since there were so many transfers with these small numbers, this may affect the significance of the Quantity variable. While the variable that identified transactions with less than ten certificates was not statistically significant, transactions with more than 1,000 certificates decreased the price by $3.41. This corresponds to my hypothesis that these large transactions would lower the price per certificate, and that they may be part of a package deal for an entire fishing busines s as someone exits the fishery. The interaction variable for quantity and large transactions increased the certificate price only by $0.59. Higher percentages of B certificates (those previously purchased from a nonfamily member) in the transaction increased the report ed sales price. If all certificates were Type B, the price was $8.43 higher. While this result supports my hypotheses that certificate type, which dictates whether or not transfer fees are required, influences certificate price, interviews explain this out come and are described below. Three of the five dummy variables included for location of the seller (Miami, Lower Keys and Key West) and four out of five for location of the buyer (all but Key West) were statistically significant. For a seller in Miami, t he price was lower by $1.62, while in the Lower Keys and Key West prices for a seller were $3.05 and $1.93 less, respectively. There are a few possible explanations for these results, and probably not the same factors affecting the results for each locatio n.

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75 The lower part of the Florida Keys, in particular Key West, has experienced development and urbanization that has decreased the number of fish houses and dockage, in addition to rising costs of living. The Lower Keys has also started to see more devel opment and may soon be subject to the same pressures of the Key West fishermen (Shivlani et al 2004). So, the negative coefficients of the dummy variables for sellers in Key West and sellers in the Lower Keys may indicate a decline in lobster fishing and thus, a decline in the market value of certificates for individuals living in these locations. A correlation analysis (Table 33) revealed that Key West fishermen are most likely to trade with someone in Key West (0.507). The Lower Keys are the next most likely to trade within their own region (0.465), and Miami fishermen follow (0.417). A possible explanation of the model results coincides with the highest three correlations; the price is lower because fishermen in these areas are more likely than others to trade with others living nearby. The estimate for seller in the Upper Keys was not significant but the estimate for a Middle Keys buyer increased the price by $3.03. Additionally, the three buyer location variables that were statistically significant showed that buyers in Miami, Middle Keys and Lower Keys paid less per certificate ( $5.73, $5.27, and $3.63, respectively). While I am unsure of why this would occur in the model results, it does suggest that the value of certificates varies among the f ive study regions. As expected, prices were lower in transactions in which both buyer and seller reside in the same area ( $3.60). Additionally, transactions with buyer and seller being both Latino or both nonLatino also lowered the pr ice, by $3.52. This supports my

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76 hypothesis that social and spatial proximity lower transaction costs, in turn lowering the certificate price. It may also be suggested that, in particular regards to the two social groups of Latino and nonLatino, linguis tic and cultural differences can affect the price in a transaction. The difference in buyer constraint and seller constraint was statistically significant in the model, suggesting that relatively more constrained buyers are associated with certific ate prices that are $3.71 low er, an unexpected result. This suggests that, when the buyer had less experience in the market and a less beneficial position in the network (so, more constrained in options and market knowledge), the c ertificate was cheaper. While I expected market experi ence and network position to affect bargaining power, the results of this model do not support that. One alternative explanation for the low coefficient is that fishermen with high constraint measures were primarily those who only bought or sold certific ates once, and in bulk with another person who also only participated in the market once. This may lower the transaction costs that normally would be associated with search and negotiation with several individuals, versus just one other fisherman. Another possible explanation is that fishermen with high constraint measures were actually more on the periphery of the network, and therefore less likely to trade with another fisherman with a lower constraint measure (i.e., more experience and better position). The broker variables had the most effect on the price, as expected. When the seller was identified as a broker, the price was increased by $16.76. For transactions with a buyer who was identified as a broker, the price decreased by $9.97. The

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77 presence of brokers had a large impact on the market and as discussed in Shivlani et al (2004) and the inter views with the fishermen that I conducted. Because there were 65 observations in which the reported sale price was zero, I also ran a Tobit model and another WLS model removing the observations with price as $.0.00 (Table 34). The model resulted in 22 statistically significant variables, almost all with p < 0.01. The constant was lower than the first model at $2.07 ( p < 0.01) In the positive valued WLS model the constant was also lower than that in the first model at $9.69 ( p < 0 .01), and 19 variables produced estimates that were statistically significant. The lower constants were expected since the original WLS estimates may be inconsistent, which would upw ard bias the intercept. Some of the variables from the new models had similar effects on the price as in the first model, while others were very different. The annual price increased in both of the new models (i.e., $0.17 in the Tobit and $1.15 in the non zero WLS model) compared to $1.05 in the first model. The effect of active reductions was also higher in the new WLS model ($2.77) versus $2.06 in the first model, but had a slight negative estimate in the Tobit ($0.04). Passive reductions were different in each model such that it is not clear what kind of effect passive reductions in which the buyer lost 25% of the total quantity in the salehave on the certificate market. It could be that the censored observations were associated with passive reductions Total quantity of certificates sold also had different resul ts between models, although the coefficient was statistically significant and negative in all three models. Perhaps the zero prices were associated with some of the larger transactions, those t hat would result in higher fee payments.

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78 The results associated with the type of certificates were robust across model specification for both WLS but not the Tobit model; the size of the coefficients was lower in the new WLS. The coefficients for transfer s between two fishermen in the same area decreased the price for all three models, but in the new WLS model the price was lower than for intraregional transfers than for transfers between fishermen of the same ethnicity the opposite of the results of the first WLS. In the new models, the locations of the seller affected the prices in the same direction (positive or negative) as in the first WLS model. However, the differences among the regions vary with each model. Variables for location of the buyer were all statistically significant in the Tobit model and in the WLS model without zeros, but in the first model the variables for buyer in the Upper Keys and in Key West are not signi ficant. All three models show that transfers with Miami buyers had the lowes t estimates. Summary The use of tradable instruments as management tools is increasing for all resources, not just fisheries, and the results of this study by incorporating program provisions in addition to spatial and social factors can prove critical to the development of theoretically sound and effective programs. Because the market is the primary mechanism to achieve goals of a transferable fishing privileges program, it is important that researchers and managers gain a better understanding of the extent to which theories of market structure and function can be applied to markets for transferable fishing privileges, specifically commercial fisheries. The provisions in the lobster trap certificate program were included with the intentions of reducing t he number of traps while protecting family businesses characteristic of the south Florida lobster fishery. However, the findings suggest that

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79 these provisions play a role in market activity and certificate price. It is important for managers to evaluate the effects of design options on the market when transferable fishing privileges are used. Like many fishing communities, the Florida spiny lobster fishery is embedded in an established social and cultural system, including two distinct ethnic groups. Addit ionally, even the most concentrated area of fishermen (Miami and the Florida Keys) is spread over 150 miles. The results from this model suggest that these spatial and social factors can have more than a minimal influence a market for tradable fishing priv ilege s. Low transaction costs that can facilitate trades rely on accessibility to buyers and sellers. If a potential transaction partner lives hours away, or speak s a different language, or work s in completely different environments, this will all affect how a market is going to work and the value of the share for different groups. The results highlight implications for futur e modeling of these systems. As understanding of these markets continues to develop, the results of this study can be used as a gui de to further the inclusion and examination of the human dimensions of fisheries. I also incorporated interview data to demonstrate how this information helped better explain the results of the price model. Combining the economic analyses with indepth int erviews validated some of my interpretations and offered alternative explanations for others. While interviews are not always possible, the findings of this paper stress the importance of collecting information about a market for transferable fishing privi leges from those who know it best : the fishermen. This paper encourages management to take into consideration factors outside of economics when designing these types of programs. The price model suggests that

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80 program provisions and the characteristics of the fishery affect the market and management goals. How programs are designed and, more importantly, maintained over time can significantly affect the share markets with direct implications for the revenues generated by the management authorities and on th e efficiency of the fishery. In other words, the implementation details can undermine management objectives, especially when a fishery is geographically dispersed or characterized by distinct cultural groups. Costello, Gaines, and Lynham (2008) reported that fisheries managed with catch shares are correlated with lower rates of collapse. So while it is know n that such management systems show potential for achieving sustainable fisheries, the authors also pointed out that the institutions need to be appropriately matched with specific characteristics of a fishery in order to be successful. This study is a first step in a new direction for studies on transferable fishing privileges programs to really examine these unique characteristics, and improve design of this promising and growing management system for fisheries. Epilogue: Interview s of Market Participants I conducted detailed interviews with the fishermen about transfers. For each participant, I used his/her specific transfer history and asked questi ons about each transfer. I was able to provide year, number of certificates, and name and location of the other person involved in the transfer. I then asked why the fisherman bought/sold, why the other person bought/sold, if he knew the person prior to the transfer, and how he found the person. The interviews also included questions about the market, such as times when it was difficult to buy or sell certificates and sources of information about price or available buyers and sellers. The interviews were semi structured to allow open

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81 discussion to collect other qualitative information. It was common for the fishermen to share information not included in the questions about the market, and I will incor porate this into the results to help explain the trap cert ificate market. With the help of two research assistants, I interviewed 50 fishermen throughout the study regions. Prior to fieldwork, I had identified individuals to interview if possible but I also relied on refer rals from other fishermen who I had inte rviewed (snowball sampling). While it was not a random sample, I did interview participants to ensure a varied representation of regions, ethnicity, and market participation. I also wanted to include information collected from interviews with the fishermen For this paper I will focus on four specific aspects from the interview data: certificate type, reductions, social ties, and brokers. When asked about differences in price for Type A and Type B certificates, the fishermen almost always noted that B cer tificates did not incur the transfer fee of $5/certificate of 25% of the sale price, as A certificates, and therefore B certificates were preferred by both the buyer and the seller. Because there were no fees for transfers of B certificates, the seller can ask for a little more per certificate (usually around $5$10 extra) because this was still less expensive than paying the transfer fees. Buyers also preferred B certificates because overall they cost less, and would allow the buyer to resell the certific ates later for this increased price. Additionally, it is interesting that fishermen I interviewed referred to transfer fees as taxes, and considered them to be extra money for the State. One fisherman explained that with As there is a windfall tax th at you have to pay the state of Florida, 25% of the purchase price. Although transfers fees are used to pay for program administration, the fishermen also felt the extra

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82 revenue generated from certificate transfers should go toward increased enforcement a nd other activities that would benefit the fishermen. Because trap theft is a major issue in the spiny lobster fishery, the perceived lack of adequate enforcement against theft is a particularly sensitive subject. Overall, there seemed to be willingness to pay more to a fellow fisherman rather than contribute to a State fund. Information from interviews highlighted that active reductions placed sellers in an advantage because in most cases professional fishermen could not avoid buying certificates to make up for the loss due to reductions. They had to buy certificates to maintain their operation sizes, especially after four 10% fishery wide reductions. However, while transactions during passive reductions lowered the price as expected, these transactions w ere not as obligatory and passive reductions affected those entering the fishery or increasing operation size. The fishermen who participated in the interviews reported that passive reductions did not give the buyer a bargaining advantage and the buyer would take the loss, instead of the seller having to lower the price. One fisherman reported in regards to transactions with passive reductions: I still have to pay the person Im buying from, and I have to take the loss. This information suggests that ther e may be different factors that are affecting the price during the years of active and passive reduction. When asked about specific transaction history, interviewees remembered details from almost all transactions he/she participated in, even those from 15 years prior, including information about the other person in the transaction. This was commonly due to a preexisting and continuing personal relationship between the buyer and seller. Many transfers were between friends, friends of friends, coworkers, and neighbors,

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83 suggesting the importance of social ties in the certificate market. When I asked the fishermen how they would find a buyer/seller today, the responses were always that they would first tell other fishermen they knew, and they would spread t he word or use the coconut telegram, a term used to describe how information is transmitted wordof mouth throughout the Florida Keys. They also preferred to participate in a transaction with someone they already knew. Because of the geography and the social characteristics (specifically the Latino and nonLatino groups) of t he fishery, I assume that fishermen lower transaction costs for certificate transfers by tapping into their own social group, which is usually someone living nearby or someone of th e same ethnicity. Fishermen interviewed reported that there were several brokers active in the market for a few years around 1997 to about 2002, the period when certificate price reached its maximum average. This corresponds with results from an extensive survey of Florid a lobster fishermen by Shivlani and Milon (2000). Even if an interviewee had not directly bought from or sold to a broker, he/she knew about them from other fishermen. Because of this, brokers had been easy to find and negotiate a transact ion with, and they could accommodate specific numbers of certificates. It was also common for brokers to buy small numbers of certificates and resell in bulk.

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84 Figure 31 Total number of transactions (triangles) and number of trap certificates tran sferred (squares)

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85 Figure 3 2 Total annual sp iny lobster landings by year ( Landings for 2010 have not been finalized and are not included in this graph. )

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86 Figure 33 Range of trap certificate prices and average price (black bar) by year

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87 Table 31. Variable definitions and hypotheses Variable Variable Description H o PRICE Reported inflation adjusted price per certificate ($) YEAR Time trend (1994=0, 1995 = 1, 2010=16) + ACTIVE Transaction occurred during a year with an active reduction (yes=1, no=0) + PASSIVE Transaction occurred during a year with a passive reduction (yes=1, no=0) + QUANTITY Number of the certificates transferred (100s) LESS10 The transaction included 9 or fewer certificates (yes=1 no=0) +/ MOREK The transaction included over 1,000 certificates (yes=1, no=0) QINTK Interaction of quantity exchanged and large transactions PER_B Percentage of B certificates (had already been transferred outside the immediate family) transf erred (%) SELL_j The seller resides in the jth area, j = Miami, Upper Keys, Middle Keys, Lower Keys, or Key West (yes=1, no=0) +/ BUY_j The buyer resides in the jth area, j = Miami, Upper Keys, Middle Keys, Lower Keys, or Key West (yes=1, no=0) +/ SAME_AREA The buyer and seller reside in the same area (yes=1, no=0) SAME_ETHNIC The buyer and seller are both Latino or both non Latino (yes=1, no=0) DIFF_CONS Difference between constraint measurement for the buyer and constraint measurement for the seller + SELL_BR The seller was identified as a broker (yes=1, no=0) + BUYER_BR The buyer was identified as a broker (yes=1, no=0)

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88 Table 32. WLS price model estimation r esults ( N = 2,402) Variable Estimate Std. Error Mean Min. Max. CONSTAN T 10.96** 1.502 ---YEAR 1.05** 0.063 6.21 0 16 ACTIVE 2.06** 0.728 0.34 0 1 PASSIVE 3.54** 0.644 0.18 0 1 QUANTITY 0.65** 0.160 3.12 0.1 37.98 LESS10 1.67 39.29 0.17 0 1 MOREK 3.41** 1.245 0.08 0 1 QINTK 0.592** 0.164 1.22 0 38 PER_B 8.43 ** 0.565 0.35 0% 100% SELL_MIAMI 1.62* 0.755 0.15 0 1 SELL_UPPER 1.14 0.748 0.16 0 1 SELL_MIDDLE 3.03** 0.764 0.21 0 1 SELL_LOWER 3.05** 0.907 0.16 0 1 SELL_KWEST 1.93* 0.883 0.12 0 1 BUY_MIAMI 5.73** 0.863 0.15 0 1 BUY_UPPER 1.26 0.844 0.23 0 1 BUY_MIDDLE 5.27** 0.806 0.26 0 1 BUY_LOWER 3.63** 1.054 0.15 0 1 BUY_KWEST 1.72 1.091 0.08 0 1 SAME_AREA 3.60** 0.499 0.50 0 1 SAME_ETHNIC 3.52** 0.534 0.82 0 1 DIFF_CONS 3.71** 0.506 0.15 1 1 SELL_BR 16.76** 1.978 0.02 0 1 BUYER_BR 9.97 ** 1.628 0.08 0 1 Note: ** and indicate statistical significance probabilities of 0.01 and 0.05, respectively.

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89 Table 33. Pearson correlation of buyers and sellers by r egion Region Pearson Correlation p value Miami 0.417 <0.0001 Upper Keys 0.306 <0 .0001 Middle Keys 0.370 <0.0001 Lower Keys 0.465 <0.0001 Key West 0.507 <0.0001

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90 Table 34. Tobit and WLS Estimation Model Results after Accounting for Zero Prices Tobit Model Results ( N = 2,402, 65 censored) WLS Model Results (N = 2 ,337) Variable Estimate Std. Error Estimate Std. Error CONSTANT 2.07** 0.030 9.69** 1.498 YEAR 0.17** 0.001 1.15** 0.065 ACTIVE 0.04* 0.014 2.77** 0.731 PASSIVE 0.16** 0.014 0.02 0.720 QUANTITY 0.06** 0.003 0.64** 0.159 LESS10 0.02 0.747 1.75 38.629 MOREK 0.54** 0.025 5.99** 1.270 QINTK 0.06** 0.003 0.78** 0.165 PER_B 0.32** 0.012 6.62** 0.578 SELL_MIAMI 0.28** 0.016 1.29 0.795 SELL_UPPER 0.24** 0.015 1.68* 0.748 SELL_MIDDLE 0.22** 0.015 2.82** 0.773 SELL_LOWER 0.29** 0.018 2.749** 0.886 SELL_KWEST 0.32** 0.019 2.12* 0.927 BUY_MIAMI 0.84** 0.018 6.70** 0.861 BUY_UPPER 0.28** 0.017 1.02 0.843 BUY_MIDDLE 0.51** 0.016 5.39** 0.804 BUY_LOWER 0.39** 0.022 4.07** 1.070 BUY_KWEST 0.32** 0.024 4.40** 1.0 83 SAME_AREA 0.36** 0.010 2.20** 0.509 SAME_ETHNIC 0.28** 0.010 3.06** 0.528 DIFF_CONS 0.28** 0.010 3.10** 0.511 SELL_BR 1.70** 0.038 18.16** 1.946 BUYER_BR 0.87** 0.031 8.85** 1.600 Note: ** and indicate statistical significance probabilities of 0.01 and 0.05, respectiv ely

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91 CHAPTER 4 EFFECTS OF PROXIMITY AND ETHNICITY ON TRA DES IN A MARKET FOR TRANSFERABLE FISHING PRIVILEGES: AN APPLICATION OF TH E QUADRATIC ASSIG N MENT PROCEDURE (QAP) Economic theory guides expectations of how markets for transferable fishing privileges develop in order to achieve management goals and in many studies, the primary way to examine market develop is to assess price signals or activity in the marketplace. However, this study f ocuses on the structure of a mark et for transferable fishing privileges and uses social network analysis metrics to examine who is trading with whom, and to test how social fishery characteristics may affect trades. In the previous chapter, the price model showed that prices were lower for transactions between two fishermen from the same area or of the same ethnicity, suggesting that transaction costs are lower for these trades. For this chapter, I further the study by analyzing the trap certificate market as a social network to test the hypothesis that fishermen with these attributes are more likely to participate in a transaction together. The Florida spiny lobster fishery is concentrated in the Miami area and in the Florida Keys, but there are regional differences among fishermen fishing in these areas, such as fishing practices, operation size (boat size and number of traps fished), community, and markets (Shivlani et al. 2004; Shivlani 2009). There are also two distinct social groups, which I refer to as Latino and nonLatino. The former is generally made up of Hispanic fishermen of Cuban descent, and the latter is primarily White Anglo fishermen. These regional and social characteristics are documented in past studies on the fishery (MacLauchlin 2006; Shivlani et al. 2005; Shivlani 2 009) and recognized by state and federal management (SAFMC/GMFMC 1982).

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92 The goal of this chapter is to incorporate these important characteristics of the spiny lobster fishery into a social network analysis of the trap certificate market, and examine if l ocation and ethnicity are correlated with more frequent transactions using the social network analysis metric Quadratic Assignment Procedure (QAP). For this, I will compare the exchange network (market for lobster trap certificates) to attribute networks ( based on the attributes Area and Ethnicity) to test the following hypotheses: a) transfers between fishermen from the same area occur more frequently than transfers between fishermen from two different areas; and b) transfers between fishermen of the same ethnicity (both Latino or both nonLatino) occur more frequently than transfers between one Latino and one nonLatino Markets for transferable fishing privileges are ideal candidates for social network analysis for two reasons. First, these markets are exc hange networks, as e ach tie in the network represents a trans action between two individuals, and can be analyzed with social network tools such as QAP. In a recent paper by Doreian and Conti (2010), QAP was used to test how social and spatial characteristi cs influenced network structure using several examples, including a European coastal trading network from several centuries ago. The authors found that geographic features of different ports (attribute matrix) affected trading with other ports (exchange ne twork matrix). Second, social ties are important in fishing communities (Acheson 1981; Clay and McGoodwin 1995) and likely to play a major role in transfers as fishermen seek to lower transaction costs by buying from or selling to other fishermen who live close by or speak the same language. The methodology and results of this study are important to assess if and how fishery characteristics can affect development of a market for transferable fishing privileges. The Florida spiny lobster trap fishery is not unique in its regional variation

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93 and social groups; most fisheries are made up of heterogeneous groups that may be based on language, geography, cultural and social factors, economic environment, and other human dimensions. For example in a study of local and nonlocal permit ownership in Alaska salmon fisheries, Knapp (2011) found that despite intentions of maintaining fishing presence in rural communities by initial allocations to individuals in these areas the dynamics of transferability and the charac teristics of the rural communities, such as limited access to capital and fishing opportunities, had changed permit ownership over time. As transferable fishing privileges become more common in fisheries management, it is important for managers and agencies to consider these fishery characteristics when designing and implementing this form of management. Studies are few that focus on how social characteristics such as location and ethnicity influence trades in t hese markets but social network analysis provi des useful tools such as QAP to investigate these relationships. Methods Data The Florida Fish and Wildlife Conservation Commission (FWC) provided the transaction data for the study. These data contain information on all transfers from 19932010 including : the names of the seller and buyer, their addresses, the number of certificates sold, the unit price, and the fees paid (if any). This information was used to create attributes for each fishermen based on location and ethnicity. F ishermens residential ad dresses were coded into attributes to determine whether they belonged to each of the following geographic areas : Miami Area, Upper Keys, Middle Keys, Lower Keys, and Key West. These divisions, which are geographically separated and vary socially and environmentally, are commonly used by residents to define the different

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94 areas. The U.S. Census Bureau has also used the divisions for the Florida Keys since 1970 (Shivlani 2009). Each buyer and seller was also identified as being either Latino or nonLatino bas ed on surname. QAP Analysis of the Trap Certificate Market Quadratic Assignment Procedure (QAP) correlation (Krackhardt 1988) was used to test the two hypotheses. In general, QAP evaluates how well one network matrix correlates with another matrix. A network matrix is generated from transfer data, as described in Chapter 2. Matrices vary in size depending on how many individuals participated in the market that is being analyzed, but when matrices are analyzed with QAP, they are the same size, have the exact same individuals, and differ only in the values of the ties. In this paper, one matrix shows presence or absence of a transaction between two fishermen, and another matrix shows presence or absence of a shared attribute (location or ethnicity). I use d the socia l network analysis software Ucinet (Borgatti, Everett, and Freeman 2002), which includes a tool to run a QAP correlation. The program permutes the data to create randomly assigned values to eliminate dependence among the variables. These values are c ompared to the observed data in the matrices. A QAP results in a Pearson correlation value, which i s used to evaluate the hypotheses. For my example, I will test how well the attributes of ethnicity and location in one matrix correlates with transactions in another matrix made up of the same individuals from the same year. For this paper, I use QAP to test a similar hypothesis using the lobster trap certificate market.

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95 Descriptive Characteristics of the Market The data include 17 fishing seasons, from 19931994 season to the 20092010 season1, and 2,420 transactions. Analyzed as social networks, Table 41 displays the number of nodes (fishermen) and number of ties for each fishing season, which varies through the program. The number of individuals participating and the number of ties is highest after a few years of the program (1997), and both are lowest in 2002, when market activity and lobster landings dropped substantially. The market recovers over the next few years and is relatively stable, but never r eaches the same activity as in the early years of the trap certificate program. Figure 41 shows the percentage of transactions for each year between two fishermen from the same area (blue) and those between two fishermen of the same ethnicity (orange). T he proportion of transactions between fishermen from the same area varies through the program, but is never less than 34% of total transactions. In more years these transactions make up more than 40 percent. The proportion of transactions between two fishermen of the same ethnicity (both Latino or both nonLatino) is even higher, and in most years these trades make up over 70% of transactions and in eight seasons the proportion of trades between two fishermen of the same ethnicity is over 80 percent. Table 4 2 shows the distribution of transactions between fishermen sharing the attributes of Area and Ethnicity. In general, transactions between two fishermen from 1 The spiny lobster fishing season begins August 6 and ends March 31 of the following year. In this paper, the second year is used in reference to that season. E.g., Season 1994 is August 6, 1993, to March 31, 1994.

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96 the same area vary in each fishing season for the different areas. For ethnicity, there are more trades between two nonLatino fishermen than between two Latino fishermen in almost each year, except in the most recent years. An explanation may be that this increase is linked to growth of the Latino population per recent findings by Knapp ( 2011) and as anecdotal evidence suggests For example, there has been a recent increased involvement by Latinos in the regional fisheries management process, such as attending public meetings (e.g., see http://keysnews.com/node/32288) submitting public testimony wi th the assistance of an interpreter at the June 2011 Gulf of Mexico Council meeting (see GMFMC website for meeting minutes at www.gulfcouncil.org) and a recent appointment of a Cuban Keys fisherman to an advisory panel to South Atlantic Fishery Management Council (see SAFMC website at www.safmc.net) Thus, i f there are more Latino fishermen, there likely would be more trades involving Latino fishermen. Results For each year, I ran a QAP correlation and the values for the Pearson correlation are shown in Ta ble 43. For the attribute Area, nine out of the seventeen fishing seasons resulted in a correlation value that was statistically significant. However, all of the correlation values are under 0.05, and some are negative. This result does not support my hypothesis and suggests that being in a similar location has little to no influence on predicting trades. For the attribute Ethnicity, only six seasons resulted in statistically significant results (Table 44). Similar to the results with Area, all values for Pearson Correlation are small, with none over 0.02 and most less than 0.01. This result does not support my hypothesis and suggests that ethnicity plays almost no role in predicting trades.

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97 The transfer data include transactions of varying size (Figure 4 2), ranging from one certificate sold in one transaction, to the largest, with 3,256 certificates sold. In the histogram, transaction size is skewed toward smaller transactions. One possible explanation for the QAP results is that transaction size may af fect the likelihood of a transaction between two fishermen from the same area or of the same ethnicity. In the price model in the previous chapter, large transactions (more than 1,000 certificates transferred) lowered the price per certificate by about onethird, and the variable had a very close estimate to those for the variables of same area and same ethnicity (Table 32). Next I separated the observations to run a QAP procedure for each fishing season by incorporating transaction size. First I tested se veral scenarios by calculating chi square values for each (Table 45) using cross tabulations with the attribute Ethnicity and presence of a transaction with different quantities of certificates. The results suggest that Ethnicity may be linked to transac tion size (smaller transactions between fishermen of the same ethnicity) but only to a certain point, as the chi square value increases as transaction size decreases, and for transactions with less than 50 certificates, the chi square value drops significa ntly. I also repeated the procedure with the attribute Area (Table 46). Overall the expected values are higher than the observed values, and most chi square values were low and not statistically significant. Using transaction size of less than 100 and l ess than 50 certificates, the chi square values are significant but relatively low (9.9 and 18.4, respectively). This suggests that where fishermen live is not an important factor, or that location is a part of a set of factors that affect transactions.

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98 Be cause the results of the cross tabulation analysis for Ethnicity suggested that this attribute may be important in predicting trades for smaller sized transactions, I conducted another QAP using only transactions with fewer than 200 certificates. Selecting only these transactions decreased the number of nodes and ties for each season, as shown in Table 47. Also in this table are the percentages of transactions with less than 200 certificates out of total transactions, which peak in the 19971999 seasons, a nd then mostly stabilize around 45 percent in more recent years. Table 48 shows the results of the QAP analyses using these transactions, which are similar to the previous QAPs I conducted for all transactions. Although the output show that many are stati stically significant, each analysis resulted in a very l ow Pearson correlation values. This does not support my second hypothesis that Ethnicity influenced trades when transaction size was less than 200 certificates. Discussion While results from the pric e model from Chapter 3 suggest that area and ethnicity may play an important role in transfers of trap certificates by lowering transaction costs, the results from the QAP analyses do not support the hypothesis that fishermen with the same ethnicity or from the same area are more likely to trade There are a few possible al ternative explanations for this. First, the distribution of transaction size (number of certificates transferred) is skewed towards smaller transactions. Because of this, and from the res ults of the price model in Chapter 3, transaction size may be an important factor in finding a transaction partner, and the decision to sell to someone close by or in the same social group. In the interviews with fishermen, when asked about smaller transac tions, several fishermen noted that it is common to buy a small number of certificates from someone that he/she

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99 knew beforehand, because the opportunity was there moreso than that the buyer needed more certificates. Additionally, during initial allocation of certificates, several hundred permit holders were allocated just ten certificates as a way to provide certificates to individuals that had low or no landings history. After the active 10% reductions, these individuals held just six certificates; likely they were not actively fishing those certificates. As a result, brokers and even some fishermen advertised and contacted people holding small numbers of certificates with offers to buy the certificates, according to information collected in interviews. Many of these certificate holders did not live in Miami or the Florida Keys, and some may even have resided outside of Florida (possibly retirees or those with second homes in Miami or the Florida Keys). These transactions may have influenced the outcome of the QAP analyses. Lastly, there were several fishing seasons (about 1997 to 2001) in which brokers were active in the trap certificate market. Based on interview data and transfer data, these individuals bought and sold many certificates and were known by advertisement and wordof mouth as brokers. In this role, these individuals may have had a further reach than most fishermen, and participated in transactions with certificate holders (particularly those with few certificates) in all areas, including other cities around Florida and outside of Florida. During the time when brokers were most active, they participated in many transactions and may have been a factor in t he results of the QAP analyses. In the next chapter, I provide a more detailed analysis of t he role of brokers in the trap certificate market.

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100 Summary T he results of these analyses present some new ways of examining the markets for transferable fishing privilege s. While the results of the QAP analyses did not support the hypothesis that location and ethnicity influenced trades, there is still value in conducting analyses of markets for transferable fishing privileges, such as the lobster trap certificates, that i nclu de social and spatial characteristics of the fishery. Further, the results indicat ed a different direction for analysis of the trap certificate market, by bringing to light that transaction size and brokers, and possibly other factors, may act together to influence certificate transfers. Although the price model in the previous chapter supported the hypothesis that negotiated prices were lower in transactions between two fishermen from the same area or of the same ethnicity, the findings in this chapter do not support a subsequent hypothesis that these trades occur more frequently. Thi s suggests that while fishermen may be willing to accept less to sell and pay less to buy when trading with other fishermen in close proximity or with those who speak the same language because the transaction costs will be lower, there are not necessarily more of these transactions in the transfer history Also, because the findings in this paper suggest that transaction size plays a role in frequency of same area or same ethnicity transactions and results from the price analysis show that largesized trans actions lower the price, this suggests that all of these factors (location, ethnicity, transaction size, and price) act in combination to determine how the trap certificate market works. Both in research and in monitoring of transferable fishing privilege programs, how these factors affect t he market should be a priority, as social and spatial variation is more common than not in many fisheries. Additionally, transaction size may be an

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101 important factor in trades, and the number of certificates that an indiv idual held was directly influenced by the program provision for initial allocation of ten certificates to permit holders with low or no landings history. Transaction size is limited by how many certificates the seller holds to begin with, and if he/she onl y held ten (or fewer after the active 10% reductions), then this may influence to whom he/she sold certificates. This is particularly important in that it was common for these certificate holders to live outside of Miami or the Florida Keys, and participat ed in transactions with brokers who advertised or actively contacted the certificate holder to make an off er to buy his/her certificates. While the prior chapters findings suggested that regional and cultural factors may have influenced certificate transf ers, the findings in this chapter indicate transaction size merits attention as well, and may have just as an important role in transfers as social characteristics. Managers should consider different types of buyers and sellers, who trade various quantities of shares, when evaluating and designing a program for transferable fishing privileges, as these differences may impact how the market functions. Most importantly, the findings in this chapter highlight some additional factors that are not commonly consi dered in program design and implementation, but may help to improve the use of transferable fishing privileges in fisheries management By evaluating fishery characteristics and program provisions, and how these influence the market, is increasingly import ant as fisheries management evolves. The use of this type of management in the United States and around the world requires better understanding of these markets, and the factors that affect transactions.

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102 Lastly, this study further demonstrates the potenti al for social network tools such as QAP to be useful in studies and monitor ing of markets for transferable fishing privileges, in any form. These programs require management to know how many shares a person owns or how much quota a fisherman holds at all t imes, and for this reason the data necessary for social network analysis are always available. This paper is a step in a new direction for evaluation of transferable fishing privilege markets.

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103 Figure 41. Proportion of total transactions between tw o individuals from the same area (blue) or of the same ethnicity (orange).

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104 Figure 42. Histogram of distribution of transaction size (number of certificates transferred)

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105 Table 41. Number of nodes and ties for each season in network form Season # of Nodes # of Ties 1994 355 242 1995 226 146 1996 264 180 1997 430 354 1998 226 169 1999 263 208 2000 158 116 2001 118 77 2002 57 33 2003 118 75 2004 193 122 2005 196 136 2006 141 95 2007 142 95 2008 158 106 2009 125 88 2010 96 63

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106 Table 4 2. Distribution of transactions based on location and ethnicity Season Miami Upper Middle Lower Key West Total Same Area Both Latino Both Non Latino Total Same Ethnicity 1994 24 22 3 32 12 101 65 137 202 1995 16 11 18 12 10 71 39 83 122 1996 23 6 22 28 8 95 34 132 166 1997 22 37 24 23 8 142 42 262 304 1998 15 21 21 10 3 73 22 123 145 1999 5 26 17 12 8 79 19 174 193 2000 8 6 15 12 5 55 17 78 95 2001 6 12 13 12 1 47 16 55 71 2002 3 0 4 2 6 15 8 15 23 2003 7 1 22 6 9 48 17 41 58 2004 10 8 20 18 21 81 27 78 105 2005 8 16 28 8 12 74 36 73 109 2006 3 10 20 5 10 49 18 49 67 2007 4 7 11 10 9 50 34 48 82 2008 10 9 30 6 7 66 30 38 68 2009 8 6 12 2 4 35 35 27 62 2010 9 4 7 1 6 29 21 24 45

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107 Table 43. Results of QAP analysis using attribute Area S eason Pearson Correlation 1994 0.00 1995 0.003 1996 0.029*** 1997 0.009** 1998 0.019*** 1999 0.017*** 2000 0.029*** 2001 0.035** 2002 0.021 2003 0.002 2004 0.014** 2005 0.003 2006 0.001 2007 0.036*** 2008 0.019** 2009 0.00 2010 0.001 p < 0 .05, ** p < 0 .01, *** p< 0.001

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108 Table 44. Results of QAP analysis using attribute Ethnicity Year Ethnicity 1994 0.005* 1995 0.006 1996 0.007* 1997 0.005** 1998 0.008* 1999 0.005 2000 0.007 2001 0.006 2002 0.019 2003 0.008 2004 0.003 2005 0.014** 2006 0.001 2007 0.021** 2008 0.001 2009 0.002 2010 0.001 p < 0.05, ** p<0.01, *** p< 0.001 Table 45. Results of crosstabulations for attribute Ethnicity and transaction size Transaction Size Observed/E xpected Chi square < 500 157 2/1537.9 19.094*** < 300 1348/1294.8 35.217*** < 200 1135/1073.0 43.405*** < 100 804/743.2 44.081*** < 50 364/341.3 10.612** >1000 155/166.2 4.505* p < 0.05, ** p < 0 .01, *** p< 0.001

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109 Table 46. Results of crosstabulations for attribute Area and transaction size Transaction Size Observed/E xpected Chi square < 500 928/940.3 1.475 < 300 773/791.66 2.579 < 200 635/656.05 2.975 < 100 417/454.38 9.895** < 50 306/353.79 18.356*** > 1000 105/101.58 0.251 p < 0.05, ** p < 0 .01, *** p< 0.001 Tab le 4 7. Descriptive characteristics of networks with selected transactions (< 200 certificates transferred) Season # of Nodes # of Ties % of Total Transactions with <200 certificates 1994 135 81 34 1995 100 58 41 1996 171 116 65 1997 351 273 77 1998 172 122 74 1999 193 154 74 2000 91 61 53 2001 63 40 55 2002 26 15 43 2003 58 33 45 2004 128 74 59 2005 91 56 44 2006 49 30 34 2007 64 39 42 2008 52 28 26 2009 58 35 42 2010 43 25 40

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110 Table 48. Results from QAP analyses for attribute Ethnicit y using only transactions with less than 200 certificates Year Ethnicity 1994 0.026*** 1995 0.026** 1996 0.018*** 1997 0.013*** 1998 0.025*** 1999 0.017*** 2000 0.024** 2001 0.060*** 2002 0.090* 2003 0.072*** 2 004 0.020** 2005 0.037*** 2006 0.069*** 2007 0.048** 2008 0.001 2009 0.052** 2010 0 .052* p < 0.05, ** p < 0 .01, *** p< 0.001

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111 CHAPTER 5 THE ROLE OF BROKERS AND TRANSFERABILITY IN SPATIAL DISTRIB UTION OF SPINY LOBSTER TRAP C ERTIFICATES In fisheries managed with transferable fishing privileges, such as catch shares, tradable permits, or effort shares, a market for a new good is created when the program is established (Newel l, Sanchirico, and Kerr 2 005). It is through the market that changes in distribution of shares will occur because the buying and selling of shares allows movement of the privileges across space, even over long distances (Stew art, Walshe, and Moodie 2006). In the Alaska salmon perm it market permit ownership was affected by limitations in rural communities and different valuations of the permit to local and nonlocal buyers (Knapp 2011). When distribution changes, this could affect the communities because when shares leave, so do fi shermen and effort (and vice versa when shares come in) (Copes and Charles 2004; Tietenberg 2002). Additionally, if a community is economically depend ent on a fishery, the outcome from changes in distribution due to transferability of the permits or shares may negatively affect the residents of the community (Knapp 2011). Transferability of fishing privileges provides opportunity for adjustments in allocations and shareholdings and allows new entrants to buy into the fishery, and is a key component of thes e types of programs (Knapp 2011). In the spiny lobster fishery, transferability of certificates was particularly important in that it allowed fishermen to readjust back to original operation size following active reductions, after which otherwise many fis hermen would not have been able to continue fishing and make a living. Brokers are one means through which transactions can occur, and studies show that it is not uncommon for brokers to be present in markets for transferable fishing privileges that are n ot centrally coordinated or facilitated by management In the New

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112 Zealand quota market, most transactions are handled by brokers (Newell, Sanchirico, and Kerr 2005). Kompas and Che (2005) also reported transfer of fishing quota through brokers in the Austr alian South East trawl fishery. In the Tasmanian rock lobster fishery, transactions with brokers make up 20% of all leases, and are used not only to lower search costs but also social costs when prices are high (van Putten and Gardner 2010). Another study on this fishery highlights the link between leasing and brokers, as these individuals are usually a large part of leasing in a fishery managed with transferable fishing privileges (Bradshaw, Williamson, and Wood 2000). In the Australian shark fishery, the results of a consolidation analysis suggested that the presence of brokers played a role in consolidation (Dwyer, King, and Minnegal 2008). For a period, several brokers were active in the Florida spiny lobster tr ap certificate market (Shivlani and Milon 2000) for both leasing and permanent transfers. Lastly, brokers are active in these markets because they can lower transaction costs, which facilitate trades and flow of shares (Connor and Alden 2001). This paper examines changes in spatial distribution an d the role of brokers in the Florida spiny lobster trap certificate market. In the Florida spiny lobster fishery, commercial effort is managed with trap certificates, a form of transferable effort shares In this program, a fisherman must hold one trap cer tificate for each lobster trap that he/she fishes (i.e., 1 certificate=1 trap). This is a form of capandtrade for lobster traps; the total number of traps is limited but the trap certificates can be bought and sold among fishermen. Initial allocation was based on each individuals past landings. The lobster trap certificate program was established in 1993 after effort in the lobster fishery increased rapidly, with trap numbers growing from 100,000 in 1960 to

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113 over 900,000 in 1990 (Larkin, Milon, and Ehrhardt 2002). The overall goal of the program was to reduce the number of traps to increase economic efficiency, and address issues with crowding, bycatch and habitat impact (Florida Statute 370.142(1)). A number of mechanisms were used to reduce the number o f certificates over time, including active reductions, passive reductions, and expiration of inactive certificates. There have been four active reductions in which each fisherman lost 10% of his/her total holdings at that time; active reductions stopped after 1999. From 20022005 the program used passive reductions, in which 25% of certificates were reverted back to the state when transferred. In the 200910 fishing season, an amendment to the program established a 10% passive reduction until the number of certificates reached 400,000. Certificates are reverted back to the state permanently when fees are not maintained for three years, although the quantity for these annually has never been more than 0.5% of total certificates (Bill Sharp, FWC, personal communication 2009). Landings of spiny lobster fishery are concentrated in the Miami are a and the Florida Keys, which I refer to in this paper collectively as the primary fishing area, and for each subarea I refer to as a region. Since establishment of th e trap certificate program, overall landings have varied between 3.3 million and 7.8 million pounds per fishing year. However, the proportion of total landings from the primary fishing regions has varied little, with 92 to 97 percent of total landings being reported from th e primary fishing area (Figure 51 ). This suggests that proportional fishing effort has also not experienced major changes. Because effort is linked to trap certificates, the number of trap certificates in the primary fishing area is expected to have remained about the same. However, the

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114 market for trap certificates has been very active, with over 2,400 transactions involving almost 750,000 certificates since program implementation in 1993. With so much market activity, it is expected that there would be some shifts in spatial distribution of shares within the primary fishing area and also to outside the area. Additionally, information from landings does not show how distribution has changed among the five regions within the primary fishing area,1 so I cannot estimate fishing effort and change among the regions from landings data The overall goal of this paper is to examine how certificate ownership distribution in the Florida spiny lobster fishery has changed over time in reference to the market for trap certificates and how brokers may have played a role. First, I present information about market activity to show how the certificate s have moved via transfers. Second I examine how distribution within the primary fishing area and outside the area has changed. Next I evaluate the change in percentage of total certificates within the five regions of the primary fishing area: the Miami area, the Upper Keys, the Middle Keys, the Lower Keys, and Key West.2 Lastly, I examine in detail the activi ty of the five main brokers who participated in the trap certificate market, and compare this information to the results of the distribution analysis. Data Fishery information was obtained from the Florida Fish and Wildlife Conservation Commission (FWC) t he agency that manages the lobster trap certificate program. Data include information on all certificate transfers since the 199394 fishing season and 1 Landings information is reported using area codes for location of harvest, but the codes are not detailed enough to identify landings associated with specific regions within the primary fishing area. 2 These distinctions are used in the area in reference to each of the five regions.

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115 information on certificate holders in each fishing season. From the transfer data, I combined the number of certificates transferred and the locations of buyers and sellers to calculate net inflow into the primary fishing area and into each region. From the certificate holder data I calculated the total number of active3 certificates in each region and cert ificates outside the primary fishing area in each fishing year. For each period, I compared the number and percentages of certificates for each region in each fishing year. In the price model in Chapter 3, I included two variables to i dentify the buyer as a broker or the seller as a broker. The criteria were based on the social network analysis metric constraint and on the individuals network size. For this paper, I use the same criteria and identify the five most active brokers in the trap certificate market a group that participated in the market with much higher frequency than any other participants I examine specifically each individuals transactions as buyer and seller. Market Activity Since the beginning of the program there have been over 2,40 0 transactions and almost 75 0,000 certificates transferred (see Figure 31) The results from the analysis on inflows into each of the five regions in the primary fishing area are presented in Figure 52 Miami area (red) shows a lot of variability throughout the program except in the last four fishing year s, in which it has substantially higher net infl ow, between 5,000 up to 10,000 certificates gained each year in 20062009. It has been suggested that the Latino proport ion of the fleet is increasing, and b ecause the fishermen in Miami are 3 Active certificates are those with upto date annual fees paid. It should be noted that activation does not necessarily imply that the certificate is being fished.

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116 predominantly Latino, this corresponds that a higher number of Latinos participating in the market would increase the inflow of certificates into the Miami region. In the first year of trades, the Upper Keys (yellow) has a very high net loss (more than 20,000) of certificates, which may indicate that many Upper Keys fishermen sold their certificates and exited the fishery early in the program. However in 1997, 1999 and 200 0 the Upper Keys has the highest inflow of any reg ions with net gain of certificates as high as 12,000 certificates in 1997 and 2000. T his inflow may be the result of the brokers in the area during this time, as discussed below The Middle Keys (green) inflow is the highest during the first three years of the program, with an annual net gain of 5,000 to 12,000 certificates but varies throughout the rest of the fishing years. In 2005, however, Middle Keys had an inflow of more than 10,000 certificates. The Lower Keys (blue) also shows variation throughout the program and experiences more net loss than gain of certificates in most years although most inflow and outflow values are less than 1,000 certificates Key West (purple) shows mostly a net loss with more than 10,000 certificates leaving the region i n 1994 and again in 2006 with a net outflow of 8,000 certificates. The few years with positive inflow for Key West have low numbers with the highest inflow at 4,000 certificates This part of the analysis yields several interesting results. First, it sho ws there is incre ased flow into the Miami region and Key West had mos tly net loss throughout the program, indicating that effort may be moving towards Miami Also, the presence of b rokers will incr ease the net inflow into a regi on. Based on these results in the next analysis on distribution I expect Miami to increase their numbers of certificates over time, for Upper Keys to have low number early in the program but numbers to increase

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117 during the period of active brokers, and for Key West to decrease in cer tificates throughout the program. Number of Certificates in Geographic Areas The overall number of certificates in each of the five regions decreased over time, which is expected as certificates are reverted back to the state through reductions or through inactive certificates (Figure 5 3 ) However, t he number of certificates in the primary fishing area has not dropped as significantly as expected in all years considering the four 10% active reductions. Miami fluctuates but in general maintains about 50,00 0 to 80,000 certificates. In later years, the number of certificates in the Miami area has increased to nearly 85,000 in 2008, but dropped to 75,370 by 2009. The Upper Keys fluctuate between 50,000 and 75,000 certificates, and in more recent years have seen a decline to about 41,000 certificates. Marathon has maintained the highest number of certificates throughout the program and averages about 175,000 certificates. In more recent years, the number of certificates decreased to fewer than 140,000 certifica tes. The Lower Keys had a relatively low number of certificates throughout the program, never more than 50,000, and in more recent years has dropped to about 45,000 certificates. Key West has experienced the most change in number of certificates, starting with 160,338, and dropping to only 84,295 certificates in 2009. Percentage of Total Certificates in Geographic Areas Figure 54 shows the percentage of total certificates in each region over time, based on the total number of active certificates in each fi shing year. Middle Keys has dominant distribution holding about 30% of all certificates as e xpected, and Key West is second with about 25% although the Key West proportion has decreased since start of

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118 the program and the region now holds 20% of certificates Upper Keys show some increase around 2000 to about 10% but less proportion in the more recent years likely because of the brokers in the area. Miamis proportion inc reased over the last few years from about 10% to 20% and the Lower Keys stays about the same at around 8 percent Outside varies between 5% and 10% with the lowest proportion in 2004 and 2009. However, although the proportional distribution shows some variation, overall the percentages of certificates in each region have actually changed very little. Brokers Of the five most active brokers that I identified for this paper, four were from Islamorada, in the Upper Keys region, and the other was from the Lower Keys. Table 41 presents details about each brokers participation in the market. The data show that the each broker always had a higher number of transactions as buyers than as seller. Usually smaller number of certificates were purchased from multiple sellers, then resold in bulk. In the following sections, I provide a detailed anal ysis for each of the top five brokers who worked in the lobster certificate market. Broker 1 In Paper 3 I discuss results from interviews wi th the fishermen, and Broker 1 was mentioned by name by several of the respondents during interviews. This broker w as initially allocated a small number of certificates, and in 1997 began to buy and sell certifica tes in large quantities (Table 52), of which many transfers were with fishermen who were allocated the original ten certificates, and at that point only held seven certificates due to the active reductions. In 2000, this broker sold all remaining certificates and exited the fishery.

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119 Figure 55 is a visual representation of Broker 1s transactions.4 Each node (dot) represents a fisherman and each line indicate s a transaction with the broker, who is the yellow node in the middle. Arrows indicate direction of the transfer but the nodes are arranged as sellers on the left and buyers on the right side. The nodes are color coded by region and the relative size of th e lines is based on the number of certificates transferred (i.e., thicker lines are larger transactions). First, Figure 5 5 illustrates how the multiple small purchases ended up as fewer, larger sells. On the left side there are many nodes and more lines that are less thick. On the right there are fewer nodes and thicker lines. Also, the colors representing the regions show that a majority of the fishermen who sold to Broker 1 were from the Upper Keys (yellow), although Broker 1 did buy certificates from f ishermen in all regions and outside the primary fishing area (black). For fishermen who bought from Broker 1, most of these nodes are yellow indicating that Broker 1 also sold mostly to Upper Keys fishermen. Broker 1 also sold to fishermen in other regions except for the Middle Keys (green), including outside the primary fishing area. Broker 2 Table 53 shows the market participation of Broker 2. This broker also lived in the Upper Keys region and only participated for three years. In 1997 Broker 2 purchase d a large number of certificates from multiple sellers. Similar to Broker 1, this broker also bought from fishermen holding only seven certificates. In 1999, Broker 2 exited the fishery. 4 It should be noted that these diagrams were created in NetDraw but I manually changed the position of the nodes in order to emphasize certain characteristics of the trades. In particular I point out that the layout of the nodes is not based on algorithms, with meaning in the placement, such as in the diagrams in Chapter 2.

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120 Broker 2s market activity is shown in Figure 5 6 which is arranged the same way as Figure 5 5 On the left side are those who sold certificates to Broker 2. This broker bought from each region, but mostly from fishermen in the Middle Keys (green) and Lower Keys (blue). The less thick lines from the sellers indicate lots of smaller transactions. There are only two buyers shown because Broker 2 sold to one of the fishermen on two occasions. Broker 3 The market participation of Broker 3, from the Lower Keys region, is shown in Table 54. Broker 3 began buying large numbers of certificates a year earlier than the other brokers, and about half of his purchases in 1996 were from fisherman holding only seven certificates. The first year was Broker 3s most active year and he did not participate in the market at all in 1998 and 1999. This broker had a few smaller sale s and exited the fishery in 2006. When Broker 3s market activity is examined in Figure 5 7 it is similar to the other brokers in that there are many smaller purchases on the left, and a few large sales on the right The majority of the sellers to Broker 3 are from the Lower Keys (blue), the same region as Broker 3, although he did buy certificates from fishermen in all the regions and outside the primary fishing area. In Broker 3s sales, three out of four buyers al so from the Lower Keys. Broker 4 Broker 4s market participation is shown in Table 55, wi th similar timeline and pattern to the other brokers. During t he first two years of activity, this broker bought a lot of certificates, and in the last few years he sold them. However, Broker 4 did not have as many small buys or large sales. This broker also did not buy or sell any certificates in

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121 1999, which was an active reduction year that possibly could have increased demand. In 2009, Broker 4 still held four certificates and is a resident of the Upper Keys. The visual representation of Broker 4s activity in the certificate market (Figure 58 ) is different from the other brokers in that it is almost balanced with buyers (right side) and sellers (left side). Additionally, the number of certificates in transactions (thickness of the lines) from sellers are larger than for the buyers, which is the opposite of the other brokers. Broker 4 bought mostly from fishermen in Key West (purple), the Lower Keys (blue) and outside (black), but sold almost all to Lower Keys fishermen. This broker had no transactions with fishermen in the Middle Keys (green). Broker 5 Table 56 shows Broker 5s market activity. This broker, who also lives in the Upper Keys, made large purchases in the first three years of participation, then began to sell certificates in 2000. Broker 5 also has more transactions as a buyer than a seller, but the difference is not as much as in some of the other brokers. This broker still held four certificates i n 2009. In Figure 59 Broker 5s participation in the certificate market looks similar to Broker 4, in which the buyers (right) and sellers (left) are nearly balanced and without the drastic difference in certificate quantity per transaction (line thickness) that was evident with Brokers 1, 2, and 3. Most of the fishermen who sold to Broker 5 were from the Lower Keys (blue) also, although Broker 5 did buy from sellers in other regions except for Miami (red). Of the few buyers for this broker, most were in the Middle Keys (green) or outside the primary fishing area (black). He also sold to fishermen in Miami (red) and one in the Upper Keys (yellow).

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122 Summary The overall summary of findings for the spatial distribution analysis is that although the trap certi ficate market has been very active, there have been four 10% reductions, and there was much variation in each regions net inflows in each fishing year, the relative distribution patterns for the five regions has changed little in terms of percentage of certificates in each region The Middle Keys maintained its dominance despite variation in the net inflow throughout the program. The Key West region decreased in relative p ercentage of certificates yet is still the second largest holder of certificates amo ng the five regions in the primary fishing area. The Upper Keys increased in certificate number for a period, but mostly only while the brokers were most active in the market, and the original p ercentage was resumed in later years. Miami has increased in proportion and the Lower Keys has experienced a small decrease in proportion, but for the most part has maintained the same percentage of total certificates. The analysis of the brokers produced some interesting findings First, the results suggest that br okers played an important role in consolidating effort in that they bought from smaller shareholders and sold in bulk. Also, it is possible that certain brokers were associated with certain areas. For example, Broker 3 transacted with more Lower Keys fishe rmen than anyone else, and because he is the only broker in the Lower Keys this is expected, and Broker 4 transacted with Middle Keys fishermen the most of all brokers. Broker 1, the most active broker, transacted with every region. Because the four of the brokers were from the Upper Keys region and participated in many transactions with other Upper Keys fishermen, this may have allowed the number of certificates in the region to increase. Although those who sold to brokers

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123 were mostly from the Upper Keys, the buyers were also, suggesting that a substantial number of certificates were kept within the region. However, when the brokers either exited the fishery or substantially reduced their number of certificates held, the numbers of certificates in the region also dropped. This suggest s that the brokers play an important role in regional distribution for the spiny lobster fishery. P lsson and Helgason (1995) wrote that changes in the actual distribution of ITQs as well as the direct and indirect response to such changes represent an important field of research. Additionally, Knapp (2011) highlighted the importance in understanding the effects of transferability and changes in ownership on communities. However, the findings in this paper suggest that transfer ability has not markedly changed the spatial distribution of trap certificates as much as expected because of high market activity and active reductions and that for the most part certificates have remained or returned to the primary fishing areas in Miam i and the Florida Keys. At a community level, transferability in the trap certificate program has not resulted in net outflow of certificate ownership, and the results suggest that transferability is an important and positive component of the program in this regard. This paper is the first to examine the role of brokers in a market for any form of transferable fishing privileges. These individuals were important in consolidating effort by purchasing small certificate holdings and reselling in bulk to fishe rmen entering the fishery, expanding operation size, or buying certificates to make up for an active reduction, and the results of this analysis suggest that brokers may have been an

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124 important part of maintaining spatial distribution of certificates in the primary fishing area of Miami and the Florida Keys. The findings in this paper are useful to management in that they demonstrate how transferability of trap certificates has allowed fishermen in the primary fishing areas (Miami and the Florida Keys) to maintain shares, and in turn the presence of fishing in these communities to contribute to the local economy and to provide employment. Additionally, the presence of brokers demonstrates how trades could be facilitated by connecting buyers in one region to sellers in another region, which may have a positive impact on the market. At this time the brokers presented in this paper are no longer participating in the market, but management could use the activity of brokers as examples of ways to facilitate tr ade s and consolidate latent effort.

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125 Figure 51 Spiny lobster landings; blue indicates landings reported from the primary fishing area and orange indicates landings reported from outside the area.

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126 Figure 52 Net inflow of certificates into each region in each fishing year

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127 0 50 100 150 200 250 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Number of Certificates (in thousands) Fishing Year Miami Upper Keys Middle Keys Lower Keys Key West Outside Figure 53 Number of certificates in each region over time Figure 54 Percentage of total certificates in each region over time

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128 Figure 55 Market activity of Broker 1; colors: red=M iami; yellow=Upper Keys; green=Middle Keys; blue=Lower Keys; purple=Key West; black=outside

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129 Figure 56 Market activity of Broker 2; colors: red=Miami; yellow=Upper Keys; green=Middle Keys; blue=Lower Keys; purple=Key West; black=outside

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130 Figure 5 7. Market activity of Broker 3; colors: red=Miami; yellow=Upper Keys; green=Middle Keys; blue=Lower Keys; purple=Key West; black=outside

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131 Figure 5 8. Market activity of Broker 4; colors: red=Miami; yellow=Upper Keys; green=Middle Keys; blue=Lower Keys; purple=Key West; black=outside

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132 Figure 5 9. Market activity of Broker 5; colors: red=Miami; yellow=Upper Keys; green=Middle Keys; blue=Lower Keys; purple=Key West; black=outside

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133 Table 51. Region and market participation for each of the five brokers Br oker Region As Buyer As Seller # Certificates # Transactions # Certificates # Transactions 1 Upper 9 914 60 8 506 28 2 Upper 2 686 41 1 542 3 3 Lower 1 845 26 1 427 4 4 Upper 2 224 17 897 13 5 Upper 4 408 21 3 466 9 Table 52. Number of certifi cates and transactions (in parentheses) for Broker 1 in each year of participation Year Certificates Bought (# Transactions) Certificates Sold (# Transactions) 1997 8 514 (47) 2 216 (6) 1998 703 (7) 1 678 (5) 1999 637(2) 4 054 (11) 2000 60 (2) 559 (6) Table 53. Number of certificates and transactions (in parentheses) for Broker 2 in each year of participation Year Certificates Bought (# Transactions) Certificates Sold (# Transactions) 1997 2 679 (40) -1998 7 (1) -1999 -1 542 (3)

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134 Table 54. Number of certificates and transactions (in parentheses) for Broker 3 in each year of participation Year Certificates Bought (# Transactions) Certificates Sold (# Transactions) 1996 1 531 (23) -1997 314 (3) -2000 -200 (2) 2001 -500 (1) 20 06 -727 (1) Table 55. Number of certificates and transactions (in parentheses) for Broker 4 in each year of participation Year Certificates Bought (# Transactions) Certificates Sold (# Transactions) 1997 1 130 (3) -1998 1 094 (14) -2000 -5 95 (7) 2001 -302 (6) Table 56. Number of certificates and transactions (in parentheses) for Broker 5 in each year of participation Year Certificates Bought (# Transactions) Certificates Sold (# Transactions) 1997 2 061 (8) -1998 1 011 (9) -1999 1 336 (2) -2000 -22 (1) 2001 -2 000 (1) 2005 -1 440 (6) 2006 -4 (1)

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135 CHAPTER 6 CONCLUSIONS The broad goal of this research was to examine how an unfacilitated market for transferable fishing privileges develops over time and to ident ify factors that affect the market. The Florida spiny lobster trap certificate program, whereby units of effort have been tradable since 1993, was used as a case study. The program provides 17 years of data and exists in a fishery characterized by two dist inct ethnic groups (Latino and nonLatino), and fishermen working in economically and culturally different regions in south Florida. Additionally, provisions for the program included active 10% reductions in the number of traps and passive reductions upon transfer of certificates. After examining the historical network visualizations of the market for units of effort (traps or trap certificates) using spatial and cultural attributes along with a measure of betweenness associated with each individual, I focused on three specific aspects of the market: 1) factors affecting the negotiated average certificate price of individual transactions; 2) the effect of proximity and ethnicity on the incidence of trades; and 3) how distribution of certificate ownership has changed, with a focus on the role of brokers in the trap certificate market. The main findings are summarized below: The spiny lobster trap certificate market is very active and complex, with many individuals participating in multiple transactions with multiple partners. Over time, the number of participants and transactions has fluctuated in different seasons. Some individuals may act as brokers or informally facilitate inter regional trades, which may have otherwise been hindered by distance. Program pro visions of the lobster trap certificate program affect certificate price in several ways. The fee required for transfers of Type A certificates, a provision put into place to waive fees for transactions between family members, actually increased the market price for Type B certificates because fishermen were willing to pay more for certificates that did not require a tax, as the fishermen called transfer fees to the State. Next, the overall goal of the program to decrease the total number of lobster traps played an important role in transactions that occurred

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136 during years with active and passive reductions, each placing the buyer or seller in different negotiating positions for the transactions. Ethnic and spatial characteristics of the fishery also influence the price for a trap certificate. Transactions between two fishermen in the same area are observed to have a lower price than transactions between fishermen from different areas. Additionally, certificate prices in transactions between two Latino or t wo nonLatino fishermen are lower than in transactions between one Latino and one nonLatino, based on designations of ethnicity from surnames. Transaction costs may be lower for transactions between fishermen who may share the same language and/or live in close proximity. Although location and ethnicity influenced certificate price and interviews with fishermen indicated that they preferred transactions with a friend, neighbor or coworker (i.e., a person that the fisherman already knew), there is no evid ence that these preferred transactions happened more frequently in the lobster certificate market Most likely, there are many factors that influence how two fishermen participate in a transaction together, and location and ethnicity are just two in a suit e of many factors. The findings suggest that transaction size (the number of certificates traded) may be an important factor. Although there have been four fishery wide 10% reductions since the beginning of the trap certificate program and several years wi th passive reductions, the market for trap certificates has remained fairly active and this has allowed the relative distribution of certificates among the five study regions to stay nearly the same over the past 17 years. Marathon remains the most promine nt area with the most certificates, while other regions experienced small fluctuations. This suggests that the market has allowed certificates to return or remain in the primary fishing areas of Miami and the Florida Keys. Individuals acting as brokers pl ayed one of the most important roles in the development of the trap certificate market. Brokers became most active around the 19961997 season, generally working via wordof mouth and by advertising in the local paper. Certificate price rose over the next few years, along with certificate leasing according to interviews with fishermen (although data on lease prices are not available because this information was not required to be submitted to the state) Additionally, brokers paid a substantially lower pri ce for certificates and typically sold certificates for a higher price. Brokers were important in consolidating latent effort, and specifically buying certificates from individuals who had originally been allocated ten certificate, and selling them in bulk to fishermen in Miami and the Florida Keys. It is likely that brokers were closely tied to the problems with certificate leasing, which was prohibited in 2001, as many individuals exited the fishery or scaled down certificate holdings after leasing stopped. Analyzing the certificate market as a social network, and specifically as an exchange network, identified individuals acting as brokers in the certificate market and highlighted how brokers consolidated certificates and redistributed them in

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137 bulk. Lastl y, while the Quadratic Assignment Procedure (QAP) of the matrix of transactions and attributes matrices did not support the hypotheses that transactions are more likely between to fishermen of the same ethnicity or from the same area, the social network analysis tool was a new and useful way to examine the relationship between transactions and fishery social characteristics. Implications for Fisheries Management These findings have important implications for the spiny lobster fishery and future management decisions for the trap certificate program. First, consistent monitoring of the certificate market would be useful to identify changes in the fishery and potential problems. This would require periodic analysis of the transfer data to evaluate changes in a ctivity and prices. The activity of the certificate market fluctuates but in general responds to factors that affect the fishery overall, such as changes in landings and market price, or environmental factors. Management can also use tools such as social n etwork analysis to identify issues such as new accumulation and concentration; regional variation in certificate prices; and exiters and new entrants to the fishery. For example, if management goals included minimizing concentration by a certain area, gear type, or operation size, or maintaining ownership in a particular area (such as the rural communities and Alaska salmon permits in Knapp (2011)), a program to monitor the market at specified intervals may identify problems earlier so that provisions could be put into place, if possible, or a non governmental organization (NGO) could provide assistance. While social network analysis is not the only method to examine changes in the market for transferable fishing privileges, tools such as visualizations could help to provide graphic representation of complex interactions among market participants, and identify patterns over time. Using network metrics such as betweenness may be useful to identify key individuals in the market and monitor the activity of pote ntial brokers.

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138 Because brokers can provide both benefits (such as lowering transaction costs and consolidating shares) and drawbacks (such as contributing to higher share prices), management may decide to, for example, limit broker activity or even tax brokered transactions. Although examining transfer data may highlight individuals who participate in the market more frequently, these people may simply be fishermen trying to expand operation size or those who adjust each year, and social network metrics suc h as betweenness provide additional information about individuals occupying beneficial positions in the marketplace. T he spiny lobster fishery is an ideal example of how monitoring by management could be useful. C urrently there are a few new changes that will affect the spiny lobster trap fishery in the near future, therefore having the potential to affect the trap certificate and the market The first is a regulatory change, in that the spiny lobster fishery has a limit on how much the total fishery can harvest, called the Annual Catch Limit (ACL) and which is a federal requirement This is the first time that there has been a limit on spiny lobster harvest. The current ACL is set at 7.32 million pounds, which is a level much higher than landings in recent years, and it is possible that the fishery no longer has the capacity to reach this level of harvest. However, the ACL is not separated into commercial and recreational quotas, which may affect the trap fishery if the recreational fishery continues to grow (and use more of the ACL), or the expanding commercial dive sector harvests a larger proportion of the ACL. In sum, if the quantity of lobster that the trap fishery can harvest decreases, this will likely affect the market for trap certificates in that p rices will respond as potential profit from lobster fishing fluctuates ; management needs to monitor the market to be able to assess the effects of establishment of the

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139 ACL and any subsequent adjustments on the lobster trap fishery. For example, interviews with fishermen reveal that fishermen in the Lower Keys and Key West depend on lobster harvest more after a few months into the season, while harvest in Miami, the Upper Keys, and Middle Keys is highest at the beginning of the season. If fishermen in the Lower Keys and Key West do not have opportunity to catch lobster because the ACL has been exceeded and triggered a closure,1 the valuation of a trap certificate may decrease in these areas and certificates may begin to move out of these regions. Lobster fishing is an important economic activity in some communities in the Lower Keys and Key West, particularly to the fish houses that depend on these fishermen, and this could negatively affect the community. Additionally, revenue for program administration in part comes from transfer fees, and these funds may diminish if certificate value decreases or trading slows due to limited harvest by trap fishermen under the ACL. Another example of change for the lobster trap fishermen is the emergence of a new market for live spiny lobster in China. As a result of this developing live market, which pays more for the product, many fishermen have installed live wells on their boats. Additionally, the demand and price for lobster certificates is starting to increase, with mor e fishermen wanting to enter the fishery or expand operation size to accommodate the new Chinese market. By monitoring the market for trap certificates, management will be able to complement other monitoring and also identify problems that may result from the live market response. 1 Currently the Accountability Measure in place for spiny lobster does not include an inseason closure if the ACL is exceeded, but this management measure is used in other fisheries and is a possible measure for the spiny lobster fishery.

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140 Brokers played an important role in the trap certificate market by consolidating latent effort and redistributing these certificates to fishermen who actually fished them. Although the brokers consolidated a large number of cert ificates, there are still many certificate holders with only four certificates (the result of an initial allocation of ten certificates and several active reductions), among other certificate holders with varying quantities of certificates who no longer fi sh them. Management could help consolidate this effort by identifying individuals who no longer report landings and facilitating communication with potential buyers. Not only would this contribute to removing latent effort and get certificates to fishermen who will fish them, it likely would result in generation of revenue for the program through transfer fees. Data collection for certificate transactions should be improved to provide adequate information for monitoring (e.g., analysis of the transfer data) the program. This is not only the responsibility of management, but also of the fishermen. Currently fishermen submit information, including prices, for certificate transfers. It is important that reporting is accurate so that monitoring of the certi fica te market is also accurate, and with the lobster trap certificate transfer data, it is possible that actual prices are higher. Without reliable price data, particularly if actual prices paid by fishermen are higher, then any analysis of economic impacts on the fishermen will not reveal all actual costs for the fishermen As a single source of fishing costs, this may not have much impact, but in combination with other costs the additional capital required to purchase certi fi cates may be a deciding factor in a fishermans decision to enter or exit the fishery, or expand an operation size. For example, some fishermen noted that establishment of the trap certificate market made entry more difficult, particularly for young people, in that it

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141 requires much more ca pital for new entrants. This is nearly impossible to verify if reported prices are lower than actual prices, and therefore could be present a challenge fo r management to justify implementation of a certificate bank or another provision to assist new entrants On the management side, t he market holds the key to capturing important information about the fishery, such as regional differences in share valuation or changes in spatial distribution, but this is not possible without correct data from the transact ion reports. In particular for the trap certificate program, revenue is generated through transfers and is based on the sale price. If reported prices are lower than actual price, funds for administration will be lost. Additionally management could play a role in organizing workshops and other outreach methods should be used to inform fishermen on the importance of accurate reporting and involve them in generating new ideas for better data collection. While there is no perfect way to collect price informati on, there are certainly ways to improve the quality and accuracy of market data. Lastly, management should accommodate Spanishspeaking fishermen to ensure that all participants understand how to submit transfer information correctly, and why accurate data is imperative to success of the program. This being said, fishermen who participated in interviews felt that involvement by state and federal managers in actual transfers should still be kept to a minimum. The fishermen are in general behaving as expected: they bought certificates to maintain operation size after reductions, they seem to make the best effort to minimize search costs, and have adapted to the trap certificates and the market. In interviews, fishermen indicated that they would prefer that the market be allowed to continue as it currently

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142 exists, and were not interested in facilitation of trades by the state or an online marketplace. The findings in this study support that the market does not need involvement of the managers. However, if fisher men felt that they would benefit from facilitation, local and community organizations, including the Florida Keys Commercial Fishermens Association, or NGOs could play an important role in setting up and managing a clearinghouse or electronic trading webs ite. Lastly, the trap certificate market is active enough to provide opportunity for new entrants to purchase certificates. However, the requirement to buy certificates is a requirement for additional capital for new entrants to the fishery, a common probl em in many fisheries managed with transferable fishing privileges. State or federal management could play an important role in establishing a loan program or certificate bank to assist new entrants in getting started in the fishery. For example, a portion of funds generated by transfer fees could be set aside for loans to new entrants who need to buy certificates. Another idea would be to take all or a portion of certificates reverted back to the State due to delinquent annual fees, or donated certificates from active fishermen, into a bank available to new entrants. In this way, effort would not increase since these are certificates that may otherwise be active, and the passive reductions on transactions are still in place until trap numbers reach the speci fied goal. These certificates could be loaned out to new entrants for a defined period of time (e.g., five years) so that the new fisherman could become established and generate funds to buy certificates over several years. Ideas such as these could help alleviate some of the negative impacts of the program and contribute to the sustainability of the fishery and the fishing communities in south Florida.

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143 The use of tradable instruments as management tools is increasing for all resources, not just fisheries, and the results of this study by explicitly capturing spatial information on social networks in addition to individual characteristics can prove critical to the development of theoretically sound and effective programs. For U.S. fisheries in particular, t here is a mandated requirement that the development of new management programs consider socioeconomic and ecosystem factors. The results and policy recommendations will also be useful to the international fishing community as transferable privileges based programs exist worldwide. Moreover, a better understanding of the role of social networks could prove crucial to the establishment and success of markets for new resourcebased assets and for management reform in developing countries where trading is likely to depend primarily on factors captured in social network analysis. Specifically in the U.S., there are 15 existing catch share programs in all regions except for the Western Pacific and the Caribbean. These programs are in addition to existing and upcom ing programs to manage fisheries with transferable effort shares or tradable permits. Additionally, there are about 30 fisheries in the U.S. that are being considered for a transferable fishing privilege program at the federal level, including individual t ransferable quotas (ITQs), sectors (group quota), bycatch ITQs, and catch shares for the for hire recreational sector (charter boats and headboats). Existing programs have provided case studies to evaluate the effectiveness of transferable fishing privile ges to reach management goals, and to assess how these programs impact the fishermen and communities. However, when the regional fisheries management councils review programs and evaluate the impacts, the reviews should

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144 include how changes in fishery characteristics over time are affected by and affect the meaning of the fishing privileges. For example, environmental factors, seafood markets, and fleet composition are dynamic, even over just a few years, and all of these can affect the value, demand, and supply of transferable fishing privileges Additionally, in fisheries that experience negative social impacts from these programs management should examine the market for transferable fisheries and consider implementing new provisions that may help to minim ize negative social impacts, such as facilitating trades if there are social or geographic barriers; addressing issues in latent shares; and establishing programs to help new entrants and smal l operations to access shares. Most importantly, data quality should be evaluated and collection methods improved, if necessary. For potential programs under consideration by managers, it is imperative that development and design incorporate the social and spatial characteristics of the fishery. Each fishery is unique and management should take advantage of the flexibility in program design to find the best way to establish the market for the privileges. In analysis of expected impacts from the new program, social and economic effects should include how the market works under various scenarios of transferability and other program provisions. Existing transferable fishing privilege programs have provided excellent examples of potential social and economic costs and benefits from this type of management, and councils devel oping a new program should consider all of these when designing the privilege market. Additionally for new programs, detailed monitoring and review including how to make changes in the program to address problems that ariseis imperative. There are

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145 potent ial problems that can be anticipated and addressed if the program design includes a monitoring program. Data collection is a key part of a monitoring plan and should be planned out prior to implementation of a program, and this should include input from th e fishermen on the best ways to collect and verify information on transfers. Significance of Findings Costello, Gaines, and Lynham (2008) pointed out the potential for catch share programs to reduce overfishing, they also noted the importance that catch s hare programs be designed to accommodate unique c haracteristics of each fishery. The new U.S. national catch share policy emphasizes the importance of developing programs that meet the needs of the fisher y and the fishing communities. Many studies on trans ferable fishing privileges point out the importance of understanding and incorporating the social characteristics and geography of the fishery into program design, r esearch and monitoring. This study further highlights the importance of the social and spat ial characteristics of a fishery in program design and research on transferable fishing privilege management. This dissertation also emphasizes how studies on markets for transferable fishing privileges can contribute to better design for these types of programs. A better understanding of how fishermen adapt to this new form of management most likely something signi ficantly different from other forms of management for a fishery is crucial to success of these programs. The function of the market will play a role in achieving all ecological and economic goals for the fishery. If the market is not functioning as expected, in particular if there are any impediments to transactions being carried out, this will compromise the outcomes of the program, including ec ological, economic and social outcomes.

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146 This research also highlights the role of brokers in markets for transferable fishing privileges. The presence of brokers do not necessarily lead to negative outcomes, as this research shows that brokers are important in consolidating effort and facilitating effort flow, which may not have happened without a broker involved. While brokerage may not be an intended consequence, brokers may be common (even informal brokerage) in these markets, maximizing the important us e of social ties and contributing to a fluid and active market. Lastly, I used social network analysis to examine the trap certificate market, which presents an additional tool for fisheries researchers to utilize. There has been increased interest in soc ial network analysis in fisheries social science overall, and this dissertation presents just a few of the possibilities of answering important questions about these markets using this method. Additionally the use of social network analysis in studies on fisheries has been scarce, but is highly appropriate given the importance of social ties in fishing communities and is perhaps the key to the development of effective transferrable management systems to suit each fishery. This study provides an example of the utility of social network analysis to analyze market structure. The results could also help to improve the use of economic theory to guide the development of effective markets for privileges based management tools in fisheries. Limitations of the Stud y The findings of the study are subject to some limitations. First price data for transactions is self reported, and at best should be considered low estimates. Because transfer fees for transactions of Type A certificates are $5 per certificate or 25% of certificate price, whichever is higher, it is likely that some fishermen reported lower prices to avoid high transfer fees. Additionally, some transactions were part of a larger

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147 sale of an entire business, which typically includes boat, traps, and permits along with certificates all for one price; in some cases these sales also included traps, permits and certificates for stone crab as well, because many lobster fishermen also participate in that fishery. For these transactions, it may have been difficult f or the buyer and seller to identify exactly how much the lobster certificates cost separately from all other components of the sale. Lastly, there may be transactions in which dollars were partially or not at all involved in the price, such as agreements t o trade certificates for gear, labor, or other goods and services. Another limitation is that this research did not incorporate behavior of individuals who did not participate in the market. At this time it is unknown if those who have not bought and sold had the same opportunities as those who did participate in the market. Some of the fishermen who have not participated may have refrained because they had enough certificates to continue operation during reductions, or because they were choosing to downsi ze anyway. Other fishermen may have not been able to find a buyer or seller, may not have been able to agree upon an appropriate price, or may not have had enough price information to make a decision about participating in the market. The findings of this study only apply to fishermen who have bought and sold certificates during the duration of the program. This study is limited on discussion and analysis of the effects of leasing a prominent characteristic of many transferable fishing privilege markets. Leasing had an important role in the lobster certificate market and was likely tied to higher average reported prices. Originally leasing was permitted in order to provide flexibility for fishermen in adjusting operation size or not fishing temporarily. How ever, like in many

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148 fisheries that have experienced negative impacts due to leasing (Pinkerton and Edwards 2009), the Florida lobster fishermen voiced complaints and eventually leasing was prohibited. Certificate prices dropped after leasing stopped, indica ting that leasing did affect certificate prices as well There was money to be made with this alternative use for the trap certificates. However, certificate leasing data are extremely limited, and price data are nonexistent, with the exception of some advertised prices in the local newspaper. The next limitation is the relatively recent use of social network analysis in studies on markets for tr ansferable fishing privileges. The appropriate social network metrics to use in an examination of the trap certificate market are still in the exploratory phase. In this study, I used the network metrics betweenness degree centrality and constraint to identify brokers and evaluate market position. The theoretical foundations for these metrics are appropriate for this study, but future research may reveal more appropriate network metrics to apply to markets for transferable fishing privileges. Additionally, I used a tool called Quadratic Assignment Procedure to test for correlation between transfers and attributes which I felt was adequate based on the theory and past studies. However, QAP may not be the best tool to test hypotheses of market activity and the findings should be considered preliminary. Future Research The next steps to address the above mentioned limitations include several possible routes to further explore how the market for lo bster trap certificates works. To address the issue of incorrect price data, a new price model could be developed that further incorporates low estimates. Additionally, reported prices could be compared to advertised prices in the newspaper and Craigslist, and used to adjust the price data.

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149 Improving the form by which fishermen report transactions could include adding a field to report nonmonetary payment for certificates as well, in order to incorporate these types of trade into analysis. Data collection on fishermen who have not bought or sold certificates would yield important information that would further understanding of the trap certificate market. Specifically, this research will be extended through a survey of fishermen who still hold original allocations but have not participated in the market to examine factors affecting decisions to buy or sell. The survey will include questions on if a fisherman did not participate in the market because he/she could not find a buyer or seller or if the price was not acceptable. Additionally there will be questions for fishermen who continue to operate despite not having replaced certificate lost through the active reductions. Last ly, the survey will also target the more than 300 certificate holders who were allocated ten certificates at the beginning of the program, but now hold only four, and collect information on why these individuals continue to keep the certificates active and do not attempt to sell them. Because information on leasing is limited, the study can only be extended to address this by incorporating leasing prices that were advertised in the local newspaper. Additionally, detailed interviews with fishermen who have w orked in the fishery since the beginning of the program may be able to provide qualitative information about leasing, which will be incorporated into future models and analyses. The next steps for social network analysis of the lobster trap certificate mar ket and other markets for transferable fishing privileges are without boundaries. For the spiny lobster fishery, the use of social network analysis can continue to be refined and new

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150 network metrics explored. This research will be extended by 1) identifying structural equivalence of individuals in the market to start work on a typology of market participants; 2) separating out specific time periods with different factors affecting the fishery as a whole for analysis; 3) detailed analysis of regional markets and other submarkets that may have emerged during the program, and 4) the effects of new regulations for a limit to annual harvest, the growing recreational and commercial dive sectors, and the new live market that likely will increase dockside price for spiny lobster. Additionally, this research will move forward by applying social network analysis to transferable fishing privilege markets in other fisheries. Recently I have conducted exploratory social network analysis on the New England multi species sector quota market, a new program that allows fishermen to join sectors and receive collective quota based on the members landings history. Each sector receives an annual allocation for 16 stocks of fish, of which fishermen harvest in different areas at different times of the year. Quota is allowed to be transferred both between sectors and within sectors, providing an interesting example for social network analysis if data become more readily available (at this time, only inter sector trades are reported). It is also common in this market for quota to be traded for quota due to seasonal and regional variations in availability of the stocks. Because of the complexity of the market, with 17 sectors (and more to come) and 16 stocks, I plan to explore twomo de network analysis as a way to examine how this market develops over time. The value of social network analysis to study markets for transferable fishing privileges is becoming more apparent and there are studies on other fisheries in process. The data are, in most cases, available in that basic information is collected on

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151 transfers to track changes in share holdings by an individual or a group. Future research in fisheries and with markets for other transferable quotas or shares will likely reveal new wa ys to use social network analysis, contributing to the overall knowledge base of these programs. This study is one step in this new direction of incorporating social characteristics of fisheries into research on markets for transferable fishing privileges, a direction that will improve our understanding and use of this important management tool.

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152 LIST OF REFERENCES Acheson, J. 1981. The Anthropology of Fishing. Annual Review of Anthropology 10: 275316. Anderson, C. M. and J.G. Sutinen. 2005. A Laboratory A ssessment of Tradable Fishing A llowances. Marine Resource Economics 20:123. Armstrong, C.W. 2008. Using History Dependence to Design a Dynamic Tradable Quota S ys tem under Market Imperfections. Environmental and Resource Economics 39:44757. Arnason, R. 1991. Efficient Management of Ocean F isheries. European Economic Review 35:40817. Arnason, R. 2005. Property Rights in Fisheries: Icelands E xperience with ITQs. Reviews in Fish Biology and Fisheries 15(3):24364 Batstone, C.J., a nd B.M.H. Sharp. 2003. Minimum Information Management Systems and ITQ Fisheries M anagement. Journal of Environmental Economics and Management 45:492504. Behringer, D.C., M.J. Butler IV, and J.D. Shields. 2008. Ecological and Physiological E ffects of PaV1 Infection on the Caribbean Spiny Lobster ( Panulirus argus Latreille). Journal of Experimental Marine Biology and Ecology 359:26 33. Bonacich, P 1987. Power and Centrality: A Family of M easures. The American Journal of Sociology 92(5):117082. Bonzon, K., K. McIlwain, C.K. Strauss and T. Van Leuvan. 2010. Catch Share Design Manual: A Guide for Managers and F ishermen. New York: Environmental Defense Fund. Borgatti, S.P., M.G. Everett, and L.C. Freeman. 2002. U cin et for Windows: Software for S ocial Network A nalysis. Harvard, MA: Analytic Technologies. Bradshaw, M., S. Williamson, and L. Wood. 2000. From Input Controls to Quota Management in the Tasmanian Rock Lobster Fishery. New Zealand Geographer 56(2):3241. Brandt, S. 2007. Evaluating Tradable Property Rights for Natural R es ources: The Role of S trategic Entry and E xit. Journal of Economic Behavior and Organization 63:15876. Buck, E.H. 1995. Individual Transferable Quotas in Fishery M anagement. CRS Report: 95849. Burt, R.S. 1992. Structural Holes Cambridge, MA: Harvard Universit y Press.

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155 Larkin, S.L., and J.W. Milon. 2000. Tradable Effort Permits: A Case Study of the Florida S piny Lobster Trap Certificate P ro gram. International Institute of Fisheries Economics and Trade Conference, Corvallis, OR, July 1014. Larkin, S., J.W. Milon, and N. Ehrhardt. 2002. Bioeconomic Models and the Florida Spiny Lobster Trap Certificate Program. Florida Coastal Environmental R esources: A Guide to Economic Valuation and Impact A nalysis D. Letson, J.W. M ilon eds., pp. 145156. Florida Sea Grant College Program. Larkin, S. and G. Sylvia. 2004. Generating Enhanced Fishery Rents by Internalizing Product Quality Characteristics. Env ironmental and Resource Economics 28(1): 101122. Leal, D.R. 2002. Fencing the Fishery Bozeman, MT: Political Economy Research Center. Lindner, R.K., H.F. Campbe ll, and G.F. Bevin. 1992. Rent Generation D uring the Transition to a M anaged Fishery: The Case of the New Zealand ITQ S ystem. Marine Resource Economics 7(4):22948. MacLauchlin, K. 2006. Local Ecological Knowledge and Informal Management of Small scale Commercial Fishermen in Bisca yne National Park. M.S. Thesis, University of Florida (Interdiscipli nary Ecology) MagnusonStevens Fishery Conservation and Management Reauthorization Act. 2007. P.L. 109479. United States Congress. McCarty, C., J.L. Molina, C. Aguilar, and L. Rota. 2007. A Comparison of Social Network Mapping and Personal Network Visual ization. Field Methods 19:14562. McCay, B.J. 1995. Social and Ecological Implications of ITQs: An Overview. Ocean and Coastal Management 28:322. McCay, B.J. 2004. ITQs and Community: An Essay on Environmental Governance. Agricultural and Resource Economi cs Review 33(2):16270. McCay, B.J., C.F. Creed, A.C. Finlayson, R. Apostle, and K. Mikalsen. 1995. Individual Transferable Quotas (ITQs) in Canadian and U.S. Fisheries. Ocean and Coastal Management 28(3):85115. Miller, N. 2011. The Gulf of Mexico Red Sn apper Individual Fishing Quota Program: The Effects on the Fishing Industry and Potential O utlook. M.S. Thesis, University of South Florida ( Environmental Science and Policy ). Milon, J.W., S.L. Larkin, a nd N.M. Ehrhardt.1999 Bioeconomic M odels of the Flori da C ommercial Spiny Lobster Fi shery. Florida Sea Grant, Report Number 117.

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158 BIOGRAPHICAL SKETCH Kari MacLauchlin was born in Stockbridge, Geor gia. She received a Bachelor of Science in e c ology from the University of Georgia in 2000. After travelling around the U.S. and Central America, she began the graduate program at the University of Florida. In 2006 she r eceived a Master of Science in interdisciplinary ecology with a Certificate in Env ironmental Education and Communications from the University of Florida Continuing as a doctoral student in interdisciplinary ecology with a concentration in Anthropology, Kari was selected as a Knauss Sea Grant Marine Policy fellow for 2010 and worked as a policy analyst in the NOAA Fisheries Office of Policy in Silver Spring, MD Currently she is t he Fisheries Social Scientist for the South Atlantic Fishery Management Council, which manages the federal fisheries of North Carolina, South Carolina, Georgia, and the east coast of Florida, including the Florida Keys (jointly managed with the Gulf of Mexico Fishery Management Council). Through this position, Kari will continue her work with the Florida spiny lobster fishery and other southeastern fisheries and coastal communities.