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Water allocation under distribution losses: Comparing alternative institutions

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  • Chakravorty, Ujjayant
  • Hochman, Eithan
  • Umetsu, Chieko
  • Zilberman, David

Abstract

The distribution of water resources is characterized by increasing returns to scale. Distribution links water generation to its end-use. Standard economic analysis overlooks the interaction among these micro-markets - generation, distribution and end-use. We compare water allocation when there is market power in each micro-market. These outcomes are compared with benchmark cases - social planning and a competitive business-as-usual regime. Simulations suggest that institutions with market power in generation and end-use generate significantly higher welfare than the distribution monopoly and the competitive regime. However, if the policy goal is to maximize the size of the grid, a distribution monopoly is preferred.

Suggested Citation

  • Chakravorty, Ujjayant & Hochman, Eithan & Umetsu, Chieko & Zilberman, David, 2009. "Water allocation under distribution losses: Comparing alternative institutions," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 463-476, February.
    • Handle: RePEc:eee:dyncon:v:33:y:2009:i:2:p:463-476
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    Cited by:

    1. Harold Houba & Françeska Tomori, 2023. "Stackelberg Social Equilibrium in Water Markets," Games, MDPI, vol. 14(4), pages 1-9, July.
    2. Xie, Yang & Zilberman, David, 2014. "The Economics of Water Project Capacities under Optimal Water Inventory Management," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6c24636b, Department of Agricultural & Resource Economics, UC Berkeley.
    3. Xie, Yang & Zilberman, David, 2015. "Water-Storage Capacities versus Water-Use Efficiency: Substitutes or Complements?," 2015 Conference, August 9-14, 2015, Milan, Italy 211894, International Association of Agricultural Economists.
    4. Françeska Tomori & Erik Ansink & Harold Houba & Nick Hagerty & Charles Bos, 2024. "Market power in California's water market," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(3), pages 1274-1299, May.
    5. David Zilberman & Alice Huang & Lanie Goldberg & Thomas Reardon, 2023. "The evolution of symbiotic innovation, water, and agricultural supply chains," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(3), pages 1592-1603, September.
    6. Zilberman, David & Huang, Alice & Reardon, Thomas A., 2022. "The evolution of symbiotic innovation, water, and agricultural supply chains," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322753, Agricultural and Applied Economics Association.
    7. Ansink, Erik & Houba, Harold, 2012. "Market power in water markets," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 237-252.
    8. Xie, Yang & Zilberman, David, 2014. "The Economics of Water Project Capacities and Conservation Technologies," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169820, Agricultural and Applied Economics Association.
    9. Krebs, Vanessa & Schmidt, Martin, 2018. "Uniqueness of market equilibria on networks with transport costs," Operations Research Perspectives, Elsevier, vol. 5(C), pages 169-173.
    10. Tomori, Françeska & Ansink, Erik & Houba, Harold & Hagerty, Nick & Bos, Charles, 2021. "Market power in California’s water market," Working Papers 2072/534854, Universitat Rovira i Virgili, Department of Economics.
    11. Ellen M. Bruno & Richard J. Sexton, 2020. "The Gains from Agricultural Groundwater Trade and the Potential for Market Power: Theory and Application," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(3), pages 884-910, May.
    12. Caravaggio, Andrea & De Cesare, Luigi & Di Liddo, Andrea, 2024. "Socio-economic determinants of pricing water for domestic use: A comparison of blocks and linear tariffs," Socio-Economic Planning Sciences, Elsevier, vol. 93(C).
    13. Zilberman, David & Kaplan, Scott & Huang, Alice & Goldberg, Lanie, 2023. "Teaching Water Economics Using Dynamics and a Political Economy Framework," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 5(3), September.
    14. Zhanqi Wang & Jun Yang & Xiangzheng Deng & Xi Lan, 2015. "Optimal Water Resources Allocation under the Constraint of Land Use in the Heihe River Basin of China," Sustainability, MDPI, vol. 7(2), pages 1-18, February.

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    More about this item

    Keywords

    Infrastructure Market power Spatial models Vertical integration Water markets;

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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