MECHANISMS FOR ADDRESSING THIRD-PARTY IMPACTS RESULTING FROM VOLUNTARY WATER TRANSFERS

James Murphy, Ariel Dinar, Richard E. Howitt, Erin Mastrangelo, Stephen Rassenti and Vernon Smith ()

No 19812, 2002 Annual meeting, July 28-31, Long Beach, CA from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: This research uses laboratory experiments to test alternative water market institutions designed to protect third-party interests. The institutions tested include taxing mechanisms that raise revenue to compensate affected third-parties, and a free market in which third-parties actively participate. We also discuss the likely implications of a command-and-control approach in which there are fixed limits on the volume of water that may be exported from a region. The results indicate that there are some important trade-offs in selecting a policy option. Although theoretically optimal, active third-party participation in the market is likely to result in free-riding that may erode some or all of the efficiency gains, and may introduce volatility into the market. Fixed limits on water exports are likely to result in a more stable market, but the constraints on exports will result in lower levels of social welfare. Taxing transfers and compensating third-parties offers a promising balance of efficiency, equity and market stability.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 25
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://ageconsearch.umn.edu/record/19812/files/sp02mu04.pdf (application/pdf)

Related works:
Chapter: Mechanisms for Addressing Third-Party Impacts Resulting From Voluntary Water Transfers (2006)
Working Paper: MECHANISMS FOR ADDRESSING THIRD PARTY IMPACTS RESULTING FROM VOLUNTARY WATER TRANSFERS (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea02:19812

DOI: 10.22004/ag.econ.19812

Access Statistics for this paper

More papers in 2002 Annual meeting, July 28-31, Long Beach, CA from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().