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Water allocation under distribution losses: Comparing alternative institutions

Ujjayant Chakravorty (), Eithan Hochman, Chieko Umetsu () and David Zilberman ()

Journal of Economic Dynamics and Control, 2009, vol. 33, issue 2, 463-476

Abstract: The distribution of water resources is characterized by increasing returns to scale. Distribution links water generation to its end-use. Standard economic analysis overlooks the interaction among these micro-markets - generation, distribution and end-use. We compare water allocation when there is market power in each micro-market. These outcomes are compared with benchmark cases - social planning and a competitive business-as-usual regime. Simulations suggest that institutions with market power in generation and end-use generate significantly higher welfare than the distribution monopoly and the competitive regime. However, if the policy goal is to maximize the size of the grid, a distribution monopoly is preferred.

Keywords: Infrastructure; Market; power; Spatial; models; Vertical; integration; Water; markets (search for similar items in EconPapers)
Date: 2009
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