The encyclopedia · Strategy & Leadership · Strategic decision · 2017–2019
New South Wales reallocated fishing rights with a combinatorial exchange auction
Australia's NSW ran an online exchange where fishers traded catch-share packages, ending a decades-long political deadlock over who got rights.
New South Wales Department of Primary Industries · University of New South Wales
the move
Catch-share programs stop overfishing by giving fishers a fixed share of the catch, but shares become a problem when inactive holders keep rights that active fishers need. In New South Wales, Australia, the reallocation of these shares had been a political deadlock for decades.
In 2017 the state ran a combinatorial exchange designed with market-design researchers. Fishers bid over the Internet with all-or-nothing orders on packages of share lots, so portfolios stayed whole; prices were linear and anonymous so sellers of identical packages received identical payments; and a subsidy was distributed through the auction itself to pull rights from inactive holders to active fishers.
The results were dramatic: 86% of active fishers' bids were matched, and their share deficits fell by 95% in high-priority share classes. A problem that had stalled in politics for years was solved in months with an auction.
why it works
- Package bidding lets bidders express complementarities, avoiding fragmented portfolios no fisher wants.
- An endogenous subsidy directed money where it was needed without a separate political negotiation.
- Linear anonymous prices made the outcome transparent and defensible to every participant.
- An online format lowered participation costs for small fishers.
what transfers
When a political fight is really an allocation problem, build a market for the contested rights; package bids let people reveal what combinations they actually need.
what came after
The exchange became a demonstration that computational optimization plus market design can resolve resource-rights reallocation, with applications argued for water and pollution rights in other cap-and-trade systems.
references
- Designing combinatorial exchanges for the reallocation of resource rights (PNAS 116(3):786-791)
- Designing combinatorial exchanges for the reallocation of resource rights — full text
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