The ability to advance efficient, market-based environmental and natural resource policies continues to be threatened by distribution issues. This observation is especially true in fisheries, where the incidence of benefits and costs of policy change are narrow and well known. Yet, there has been little research into how policymakers can avoid unintentionally transferring processing sector wealth to harvesters. We present a distributionally neutral but efficient rationalization policy design that blends elements of a cooperative and a partnership. It is formally proven that there is no impediment to win-win rationalization using only IFQs that are allocated only to harvesters, providing they first join a "dissolution fishery association" with the processor(s) through which their catch history arose. The approach focuses bilateral negotiations on how to partition the total quasi rents of the fishery association between a single processor and its traditional harvesters.; Once a DFA is formed, the harvesters or the processor may dissolve their association if a superior alternative opportunity is available. This sets off the realignment and consolidation across DFA members. The industry-wide efficiency is maximized by the arbitrage efficiency gains from the realignment. However, the welfare of DFA members is differentially affected by this realignment. Gains from trade assure all firms in acquisitive DFAs are better off or at least no worse off, providing certain minimal conditions are met. But members of a dissolved DFA are less easily accommodated. We stipulate the conditions under which some firms in a dissolved DFA voluntarily join an acquisitive DFA or voluntarily lease/sell their quota at the equilibrium composite quota price. Some relatively efficient member, however, may be involuntarily forced from their initial DFA. We examine the conditions under which none of these firms may be made worse off relative to the license-limited policy state. As a result, with the rationalization gain exceeding doubling of fishery, all the firms in a dissolved DFA are proved to be Pareto safe relative to license-limited policy state. This means that DFA design makes it possible to avoid the unintended wealth transfer of a conventional harvester-only allocation, while the efficiency is maximized.
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