ASYMMETRIC INFORMATION AND THE PRICING OF NATURAL RESOURCES: THE CASE OF UNMETERED WATER; Proceedings of the Fifth Joint Conference on Agriculture, Food, and the Environment, June 17-18, 1996, Padova, Italy

Rodney B.W. Smith and Yacov Tsur

No 14368, Working Papers from University of Minnesota, Center for International Food and Agricultural Policy

Abstract: This paper uses mechanism design theory to (i) propose a mechanism to price irrigation water when farmers are heterogeneous in their production technologies (adverse selection) and their individual water uses are unobserved (moral hazard) and (ii) discusses briefly when such a mechanism might be economically unreasonable. Unmetered irrigation water is often priced by imposing per-acre fees on cultivated acreage or by charging per-unit fees on observable inputs or outputs. The offered pricing procedure is based on the observed output and achieves a first-best outcome when implementation is free of transaction costs.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 16
Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:ags:umciwp:14368

DOI: 10.22004/ag.econ.14368

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