Risk Aversion and Urban Water Decisions

John Freebairn

No 124206, 2012 Conference (56th), February 7-10, 2012, Fremantle, Australia from Australian Agricultural and Resource Economics Society

Abstract: Application of the product characteristics model and the finance portfolio choice model are used to illustrate the important effects of risk aversion held by decision makers in making decisions in the urban water markets. Decision makers face uncertainty about water demand, water inflows and supply costs, and about government policy. Relative to risk neutrality assumed in many models, risk aversion changes decisions about the management of available water supply infrastructure, and about the form and timing of supply augmentation options. Recognition of heterogeneity of buyer preference with respect to risk suggest efficiency gains from offering a variety of cost-security of supply characteristic packages to water buyers.

Keywords: Community/Rural/Urban Development; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Pages: 16
Date: 2012-02
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aare12:124206

DOI: 10.22004/ag.econ.124206

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