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State-contingent modelling of the Murray Darling Basin: implications for the design of property rights

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  • Adamson, David
  • Mallawaarachchi, Thilak
  • Quiggin, John C.

Abstract

Questions relating to the allocation and management of risk have played a central role in the development of the National Water Initiative, particularly as it has applied to the Murray- Darling Basin. The central issues of efficiency and equity in allocations are best understood by considering water licenses as bundles of state-contingent claims. The interaction of property rights and uncertainty regarding water flows, production and output prices is modelled using a state-contingent representation of production under uncertainty. The role of technology and investment in the determination of efficient adaptation strategies to manage risks is explored using an illustrative example.

Suggested Citation

  • Adamson, David & Mallawaarachchi, Thilak & Quiggin, John C., 2006. "State-contingent modelling of the Murray Darling Basin: implications for the design of property rights," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 137977, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare06:137977
    DOI: 10.22004/ag.econ.137977
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    References listed on IDEAS

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    1. John Quiggin & Robert G. Chambers, 2006. "The state-contingent approach to production under uncertainty ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(2), pages 153-169, June.
    2. John Freebairn & John Quiggin, 2006. "Water rights for variable supplies ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 295-312, September.
    3. Grossman, Sanford J & Hart, Oliver D, 1983. "An Analysis of the Principal-Agent Problem," Econometrica, Econometric Society, vol. 51(1), pages 7-45, January.
    4. Adamson, David & Mallawaarachchi, Thilak & Quiggin, John, 2004. "Modelling basin level allocation of water in the Murray Darling Basin in a world of uncertainty," Risk and Sustainable Management Group Working Papers 149844, University of Queensland, School of Economics.
    5. Just, Richard E. & Pope, Rulon D., 1978. "Stochastic specification of production functions and economic implications," Journal of Econometrics, Elsevier, vol. 7(1), pages 67-86, February.
    6. Chambers,Robert G. & Quiggin,John, 2000. "Uncertainty, Production, Choice, and Agency," Cambridge Books, Cambridge University Press, number 9780521622448, October.
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    Cited by:

    1. Peggy Schrobback & David Adamson & John Quiggin, 2009. "Turning Water into Carbon: Carbon sequestration vs. water flow in the Murray-Darling Basin," Murray-Darling Program Working Papers WP2M09, Risk and Sustainable Management Group, University of Queensland.
    2. Adamson, David & Mallawaarachchi, Thilak & Quiggin, John C., 2007. "Water use and salinity in the Murray–Darling Basin: A state-contingent model," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(3), pages 1-19.
    3. Brennan, Donna C., 2006. "Water policy reform in Australia: lessons from the Victorian seasonal water market," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 1-21, September.
    4. Mallawaarachchi, Thilak & Auricht, Christopher & Loch, Adam & Adamson, David & Quiggin, John, 2020. "Water allocation in Australia’s Murray–Darling Basin: Managing change under heightened uncertainty," Economic Analysis and Policy, Elsevier, vol. 66(C), pages 345-369.
    5. Donna Brennan, 2006. "Water policy reform in Australia: lessons from the Victorian seasonal water market ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 403-423, September.
    6. Peggy Schrobback & David Adamson & John Quiggin, 2011. "Turning Water into Carbon: Carbon Sequestration and Water Flow in the Murray–Darling Basin," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(1), pages 23-45, May.

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    More about this item

    Keywords

    Resource /Energy Economics and Policy;

    JEL classification:

    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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