IDEAS home Printed from https://ideas.repec.org/a/spr/waterr/v24y2010i12p3065-3083.html
   My bibliography  Save this article

A Smart Market for Impervious Cover

Author

Listed:
  • John Raffensperger
  • Thomas Cochrane

Abstract

When farmland or undeveloped ground is covered over, runoff can cause environmental damage and flood risk. Policymakers want to compare the economic improvement of new development to the costs produced by the associated environmental impacts. In this paper, we propose a smart market in impervious cover. A smart market is a periodic auction which is cleared by an optimization model, a linear program (LP) in this case. The LP constraint coefficients come from a hydrological model. The LP objective coefficients come from users’ bids. To operate the auction, local government would appoint an auction manager, who would be responsible for maintaining the hydrological model and the LP, for operating the auction, and for maintaining the desired environmental standards. At regular intervals, the auction manager would accept bids over the internet, solve the corresponding LP, and announce the results. By LP duality, the smart market prices impervious cover at the opportunity cost to society, adjusted for location, the sensitivity of environmental features, and the incremental value of the development as indicated by bids. This design uses relevant hydrological information, and accepts community input on the desired environmental standards (avoiding the tragedy of the commons). The auction creates incentives to remove impervious cover, especially near environmentally sensitive areas. The proposed system nearly eliminates transaction costs associated with trading development rights. Copyright Springer Science+Business Media B.V. 2010

Suggested Citation

  • John Raffensperger & Thomas Cochrane, 2010. "A Smart Market for Impervious Cover," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 24(12), pages 3065-3083, September.
    • Handle: RePEc:spr:waterr:v:24:y:2010:i:12:p:3065-3083
    DOI: 10.1007/s11269-010-9595-y
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11269-010-9595-y
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11269-010-9595-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. James Murphy & Ariel Dinar & Richard Howitt & Steven Rassenti & Vernon Smith, 2000. "The Design of ``Smart'' Water Market Institutions Using Laboratory Experiments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 17(4), pages 375-394, December.
    2. K. Geetha & S. Mishra & T. Eldho & A. Rastogi & R. Pandey, 2008. "SCS-CN-based Continuous Simulation Model for Hydrologic Forecasting," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 22(2), pages 165-190, February.
    3. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    4. Walls, Margaret & McConnell, Virginia, 2004. "Incentive-Based Land Use Policies and Water Quality in the Chesapeake Bay," RFF Working Paper Series dp-04-20, Resources for the Future.
    5. Bhaskar Chakravorti & William W. Sharkey & Yossef Spiegel & Simon Wilkie, 1995. "Auctioning the Airwaves: The Contest for Broadband pcs Spectrum," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 345-373, June.
    6. Fabrizio Ravagnani & Alberto Pellegrinelli & Marco Franchini, 2009. "Estimation of Urban Impervious Fraction from Satellite Images and Its Impact on Peak Discharge Entering a Storm Sewer System," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 23(10), pages 1893-1915, August.
    7. Robert L. Graves & Linus Schrage & Jayaram Sankaran, 1993. "An Auction Method for Course Registration," Interfaces, INFORMS, vol. 23(5), pages 81-92, October.
    8. Chakravorti, Bhaskar, et al, 1995. "Auctioning the Airwaves: The Contest for Broadband PCS Spectrum," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 345-373, Summer.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mu Lin & Di Zhang & Ben Chen & Hang Zheng, 2024. "The Economic Analysis of the Common Pool Method through the HARA Utility Functions," Papers 2408.05194, arXiv.org.
    2. Raffensperger, John F., 2011. "Matching users' rights to available groundwater," Ecological Economics, Elsevier, vol. 70(6), pages 1041-1050, April.
    3. Syezlin Hasan & Line Block Hansen & James C. R. Smart & Berit Hasler & Mette Termansen, 2022. "Tradeable Nitrogen Abatement Practices for Diffuse Agricultural Emissions: A ‘Smart Market’ Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(1), pages 29-63, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Peter Cramton, 2002. "Spectrum Auctions," Papers of Peter Cramton 01hte, University of Maryland, Department of Economics - Peter Cramton, revised 16 Jul 2001.
    2. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 267-343, Summer.
    3. Claude Montmarquette & Jacques Robert, 1999. "Sequential Auctions with Multi-Unit Demand: Theory, Experiments and Simulations," CIRANO Working Papers 99s-46, CIRANO.
    4. Suresh P. Sethi & Sushil Gupta & Vipin K. Agrawal & Vijay K. Agrawal, 2022. "Nobel laureates’ contributions to and impacts on operations management," Production and Operations Management, Production and Operations Management Society, vol. 31(12), pages 4283-4303, December.
    5. Raffensperger, John F., 2011. "Matching users' rights to available groundwater," Ecological Economics, Elsevier, vol. 70(6), pages 1041-1050, April.
    6. Alan Gunderson & Ruqu Wang, 1998. "Signally By Jump Bidding In Private Value Auctions," Working Paper 975, Economics Department, Queen's University.
    7. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 431-495, September.
    8. John F. Raffensperger & Mark W. Milke & E. Grant Read, 2009. "A Deterministic Smart Market Model for Groundwater," Operations Research, INFORMS, vol. 57(6), pages 1333-1346, December.
    9. Bichler, Martin & Paulsen, Per, 2018. "A principal-agent model of bidding firms in multi-unit auctions," Games and Economic Behavior, Elsevier, vol. 111(C), pages 20-40.
    10. Levin, Jonathan, 1997. "An Optimal Auction for Complements," Games and Economic Behavior, Elsevier, vol. 18(2), pages 176-192, February.
    11. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659, Elsevier.
    12. Qiuyue Xia & Lu Li & Jie Dong & Bin Zhang, 2021. "Reduction Effect and Mechanism Analysis of Carbon Trading Policy on Carbon Emissions from Land Use," Sustainability, MDPI, vol. 13(17), pages 1-22, August.
    13. Frans P. Vries & Nick Hanley, 2016. "Incentive-Based Policy Design for Pollution Control and Biodiversity Conservation: A Review," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(4), pages 687-702, April.
    14. Usher, Dan, 2001. "Personal goods, efficiency and the law," European Journal of Political Economy, Elsevier, vol. 17(4), pages 673-703, November.
    15. George Tridimas & Stanley L. Winer, 2018. "On the Definition and Nature of Fiscal Coercion," Carleton Economic Papers 18-09, Carleton University, Department of Economics.
    16. Mario Jametti & Thomas von Ungern-Sternberg, 2005. "Assessing the Efficiency of an Insurance Provider—A Measurement Error Approach," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 30(1), pages 15-34, June.
    17. Stephanie Rosenkranz & Patrick W. Schmitz, 2007. "Can Coasean Bargaining Justify Pigouvian Taxation?," Economica, London School of Economics and Political Science, vol. 74(296), pages 573-585, November.
    18. Stefan Ambec & Yann Kervinio, 2016. "Cooperative decision-making for the provision of a locally undesirable facility," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 46(1), pages 119-155, January.
    19. Liu, Duan & Yu, Nizhou & Wan, Hong, 2022. "Does water rights trading affect corporate investment? The role of resource allocation and risk mitigation channels," Economic Modelling, Elsevier, vol. 117(C).
    20. Valcu-Lisman, Adriana & Weninger, Quinn, 2012. "Markov-Perfect rent dissipation in rights-based fisheries," ISU General Staff Papers 201209260700001037, Iowa State University, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:waterr:v:24:y:2010:i:12:p:3065-3083. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.