IDEAS home Printed from https://ideas.repec.org/h/nbr/nberch/14943.html
   My bibliography  Save this book chapter

Market Design for Surface Water

In: New Directions in Market Design

Author

Listed:
  • Billy A. Ferguson
  • Paul Milgrom

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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Billy A. Ferguson & Paul Milgrom, 2024. "Market Design for Surface Water," NBER Chapters, in: New Directions in Market Design, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:14943
    as

    Download full text from publisher

    File URL: http://www.nber.org/chapters/c14943.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bonnie G. Colby, 1990. "Transactions Costs and Efficiency in Western Water Allocation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(5), pages 1184-1192.
    2. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    3. Johan Rockström & Mariana Mazzucato & Lauren Seaby Andersen & Simon Felix Fahrländer & Dieter Gerten, 2023. "Why we need a new economics of water as a common good," Nature, Nature, vol. 615(7954), pages 794-797, March.
    4. Hanemann, W. Michael, 2005. "The economic conception of water," CUDARE Working Papers 120463, University of California, Berkeley, Department of Agricultural and Resource Economics.
    5. Charles Regnacq & Ariel Dinar & Ellen Hanak, 2016. "The Gravity of Water: Water Trade Frictions in California," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(5), pages 1273-1294.
    6. Charles W. Howe & Jeffrey K. Lazo & Kenneth R. Weber, 1990. "The Economic Impacts of Agriculture-to-Urban Water Transfers on the Area of Origin: A Case Study of the Arkansas River Valley in Colorado," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(5), pages 1200-1204.
    7. Huffaker, Ray & Whittlesey, Norman, 2000. "The allocative efficiency and conservation potential of water laws encouraging investments in on-farm irrigation technology," Agricultural Economics, Blackwell, vol. 24(1), pages 47-60, December.
    8. Robert A. Young, 1986. "Why Are There So Few Transactions among Water Users?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(5), pages 1143-1151.
    9. Bryan Leonard & Christopher Costello & Gary D Libecap, 2019. "Expanding Water Markets in the Western United States: Barriers and Lessons from Other Natural Resource Markets," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 13(1), pages 43-61.
    10. Roth, Alvin E & Xing, Xiaolin, 1994. "Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions," American Economic Review, American Economic Association, vol. 84(4), pages 992-1044, September.
    11. Young, Michael D., 2014. "Designing water abstraction regimes for an ever-changing and ever-varying future," Agricultural Water Management, Elsevier, vol. 145(C), pages 32-38.
    12. Bruce C. Greenwald & Joseph E. Stiglitz, 1986. "Externalities in Economies with Imperfect Information and Incomplete Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(2), pages 229-264.
    13. Paul Milgrom & Ilya Segal, 2020. "Clock Auctions and Radio Spectrum Reallocation," Journal of Political Economy, University of Chicago Press, vol. 128(1), pages 1-31.
    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. Ricardo Martinez & Juan D. Moreno-Ternero, 2024. "Fair allocation of riparian water rights," Papers 2407.14623, arXiv.org.

    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. Jedidiah Brewer & Robert Glennon & Alan Ker & Gary Libecap, 2007. "Water Markets in the West: Prices, Trading, and Contractual Forms," ICER Working Papers 30-2007, ICER - International Centre for Economic Research.
    2. Smith, Steven M., 2021. "The relative economic merits of alternative water right systems," Journal of Environmental Economics and Management, Elsevier, vol. 105(C).
    3. Elbakidze, Levan & Vinson, Hannah & Cobourn, Kelly & Taylor, R.Garth, 2018. "Efficient groundwater allocation and binding hydrologic externalities," Resource and Energy Economics, Elsevier, vol. 53(C), pages 147-161.
    4. Mani Rouhi Rad & Taro Mieno & Nicholas Brozović, 2022. "The Role of Search Frictions and Trading Ratios in Tradable Permit Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(1), pages 101-132, May.
    5. Ray, Isha & Williams, Jeffrey, 2002. "Locational asymmetry and the potential for cooperation on a canal," Journal of Development Economics, Elsevier, vol. 67(1), pages 129-155, February.
    6. Garrick, Dustin & Whitten, Stuart M. & Coggan, Anthea, 2013. "Understanding the evolution and performance of water markets and allocation policy: A transaction costs analysis framework," Ecological Economics, Elsevier, vol. 88(C), pages 195-205.
    7. Bruno, Ellen M. & Jessoe, Katrina, 2021. "Missing markets: Evidence on agricultural groundwater demand from volumetric pricing," Journal of Public Economics, Elsevier, vol. 196(C).
    8. Jedidiah Brewer & Robert Glennon & Alan Ker & Gary Libecap, 2008. "2006 Presidential Address Water Markets In The West: Prices, Trading, And Contractual Forms," Economic Inquiry, Western Economic Association International, vol. 46(2), pages 91-112, April.
    9. Browne, Oliver R. & Ji, Xinde James, 2023. "The Economic Value of Clarifying Property Rights: Evidence from Water in Idaho’s Snake River Basin," Journal of Environmental Economics and Management, Elsevier, vol. 119(C).
    10. Petrick, Martin, 2004. "Governing Structural Change And Externalities In Agriculture: Toward A Normative Institutional Economics Of Rural Development," IAMO Discussion Papers 14878, Institute of Agricultural Development in Transition Economies (IAMO).
    11. Weerachart T. Kilenthong & Robert M. Townsend, 2021. "A Market-Based Solution for Fire Sales and Other Pecuniary Externalities," Journal of Political Economy, University of Chicago Press, vol. 129(4), pages 981-1010.
    12. David Zetland & Bene Colenbrander, 2018. "Water Civilization: The Evolution of the Dutch Drinking Water Sector," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(03), pages 1-36, July.
    13. Anton Korinek, 2017. "Currency wars or efficient spillovers?," BIS Working Papers 615, Bank for International Settlements.
    14. Anton Korinek, 2016. "Currency Wars or Efficient Spillovers? A General Theory of International Policy Cooperation," NBER Working Papers 23004, National Bureau of Economic Research, Inc.
    15. Salimata Traore, 2020. "Farmer organizations and maize productivity in rural Burkina Faso: The effects of the diversion strategy on cotton input loans," Review of Development Economics, Wiley Blackwell, vol. 24(3), pages 1150-1166, August.
    16. Marcus Miller & Lei Zhang, 2015. "The Hedgehog and the Fox: From DSGE to Macro-Pru," Manchester School, University of Manchester, vol. 83, pages 31-55, September.
    17. Edward P. Lazear, 2000. "Economic Imperialism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(1), pages 99-146.
    18. Ranjan, Ram & Gollehon, Noel R. & Aillery, Marcel P., 2004. "Explaining Participation in Spot and Options Markets for Water," Working Papers 15650, University of Florida, International Agricultural Trade and Policy Center.
    19. Mariana Mazzucato & Rainer Kattel & Josh Ryan-Collins, 2020. "Challenge-Driven Innovation Policy: Towards a New Policy Toolkit," Journal of Industry, Competition and Trade, Springer, vol. 20(2), pages 421-437, June.
    20. Weerachart T. Kilenthong & Robert M. Townsend, 2021. "A Market-Based Solution for Fire Sales and Other Pecuniary Externalities," Journal of Political Economy, University of Chicago Press, vol. 129(4), pages 981-1010.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

    Statistics

    Access and download statistics

    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:nbr:nberch:14943. 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    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.