Do security-differentiated water rights improve the performance of water markets?
Most existing water markets combine water rights trading
and water allocation trading. Offering security-differentiated water
rights can make the market more efficient and allow water users to
manage the risks of supply uncertainty better. We conduct a laboratory
experiment which compares two designs for water rights; one with a
single security level and another with two security levels. We find
that a two security level system increases overall profits when transactions
costs are lower on the water rights market than on the water allocation
market. It also improves risk allocation by allowing subjects to trade-off
profits variability against expected profits according to their risk
type and this result is robust to the existence of transactions costs
on either market.
LEFEBVRE Marianne;
GANGADHARAN Lata;
THOYER Sophie;
2012-09-21
OXFORD UNIV PRESS INC
JRC70680
0002-9092,
http://ajae.oxfordjournals.org/content/early/2012/08/24/ajae.aas060.full.pdf?keytype=ref&ijkey=pvwNIHMki2bMF9Q,
https://publications.jrc.ec.europa.eu/repository/handle/JRC70680,
10.1093/ajae/aas060,
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