The British Columbia halibut fishery provides a natural experiment of the effects of “privatizing the commons.” Using firm‐level data from the fishery 2 years before private harvesting rights were introduced, the year they were implemented, and 3 years afterward, a stochastic frontier is estimated to test for changes in technical, allocative, and economic efficiency. The study indicates that (1) the short‐run efficiency gains from privatization may take several years to materialize and can be compromised by restrictions on transferability, duration, and divisibility of the property right; (2) substantial long‐run gains in efficiency can be jeopardized by preexisting regulations and the bundling of the property right to the capital stock; and (3) the gains from privatization are not just in terms of cost efficiency but include important benefits in revenue and product form.
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