Interst Group Incentives for Post-lottery Trade Restrictions

Abstract

The rights to use publicly-managed natural resources are sometimes distributed by lottery,and typically these rights are non-transferable. Prohibition of post-lottery permit transfers discourages applicants from entering the lottery solely for protable permit sale, so only those who personally value the use of the resource apply. However, because permits are distributed randomly and trade is restricted, permits may not be used by those who value them most. We examine a possible rationale for restrictions on permit transfers based on the distribution of welfare across interest groups, and characterize the economic conditions under which post-lottery prohibitions on trade are likely to arise. We develop our model using the specic case of the Four Rivers Lottery used to allocate rafting permits on four river sections in Idaho and Oregon.lottery, trade prohibition, interest groups