State-contingent modelling of the Murray Darling Basin: implications for the design of property rights

David Adamson (), Thilak Mallawaarachchi () and John Quiggin ()

No WP2M06, Murray-Darling Program Working Papers from Risk and Sustainable Management Group, University of Queensland

Abstract: Questions relating to the allocation and management of risk have played a central role in the development of the National Water Initiative, particularly as it has applied to the Murray-Darling Basin. The central issues of efficiency and equity in allocations are best understood by considering water licenses as bundles of state-contingent claims. The interaction of property rights and uncertainty regarding water flows, production and output prices is modelled using a state-contingent representation of production under uncertainty. The role of technology and investment in the determination of efficient adaptation strategies to manage risks is explored using an illustrative example.

JEL-codes: Q24 Q25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr
Date: Written 2006-02
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