Market Design for Surface Water

Billy A. Ferguson and Paul Milgrom

No 32010, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Many proposed surface water transfers undergo a series of regulatory reviews designed to mitigate hydrological and economic externalities. While these reviews help limit externalities, they impose substantial transaction costs that also limit trade. To promote a well-functioning market for surface water in California, we describe how a new kind of water right and related regulatory practices can balance the trade-off between externalities and transaction costs, and how a Water Incentive Auction can incentivize a sufficient number of current rights holders to swap their old rights for the new ones. The Water Incentive Auction adapts lessons learned from the US government’s successful Broadcast Incentive Auction.

JEL-codes: D23 (search for similar items in EconPapers)
Date: 2023-12
New Economics Papers: this item is included in nep-agr, nep-des, nep-env and nep-reg
Note: EEE LE
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Citations:

Forthcoming: Market Design for Surface Water , Billy A. Ferguson, Paul Milgrom. in New Directions in Market Design , Lo, Ostrovsky, and Pathak. 2024

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