Impacts of water rights security on water markets: experimental evidence
Impacts de la différenciation des droits d'eau en terme de sécurité : étude expérimentale des marchés de l'eau
Résumé
Water markets are xpected to lead to e_cient use of scarce water by re-allocating water from low value uses to high value uses. However a water allocation system must not only allocate speci_c volumes of water among users but also allocate the risk of supply shortages. The existence of both a market of water rights and a spot market of water allotments is necessary to allow users to manage better the risk of increased supply uncertainty. Whether the water rights market should be further sophisticated by o_ering di_erent levels of security for rights is unclear. Indeed, increasing the complexity of water markets can eventually reduce e_ciency gains and cost-e_ectiveness of water trade. We propose an experimental design that captures the main characteristics of water markets. Farmers _rst participate in the market for water rights while facing uncertainty on water allotments. . Once the water supply is known, they can trade their water allocation on the spot market. We examine two water right scenarios, one with a unique security level and another iwith two levels of security and we compare them in terms of allocation e_ciency, risk allocation and cost e_ectiveness. We vary transactions costs as a treatment variable and elicit risk preferences of subjects. By comparing the performance of the markets in each treatment, we can measure the bene_ts of having two levels of security for water rights and test whether they are contingent on the characteristics of transaction costs and risk aversion.
Domaines
Sciences de l'Homme et Société
Origine : Fichiers produits par l'(les) auteur(s)
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