IDEAS home Printed from https://ideas.repec.org/p/ags/umciwp/14368.html
   My bibliography  Save this paper

ASYMMETRIC INFORMATION AND THE PRICING OF NATURAL RESOURCES: THE CASE OF UNMETERED WATER; Proceedings of the Fifth Joint Conference on Agriculture, Food, and the Environment, June 17-18, 1996, Padova, Italy

Author

Listed:
  • Smith, Rodney B.W.
  • Tsur, Yacov

Abstract

This paper uses mechanism design theory to (i) propose a mechanism to price irrigation water when farmers are heterogeneous in their production technologies (adverse selection) and their individual water uses are unobserved (moral hazard) and (ii) discusses briefly when such a mechanism might be economically unreasonable. Unmetered irrigation water is often priced by imposing per-acre fees on cultivated acreage or by charging per-unit fees on observable inputs or outputs. The offered pricing procedure is based on the observed output and achieves a first-best outcome when implementation is free of transaction costs.

Suggested Citation

  • Smith, Rodney B.W. & Tsur, Yacov, 1996. "ASYMMETRIC INFORMATION AND THE PRICING OF NATURAL RESOURCES: THE CASE OF UNMETERED WATER; Proceedings of the Fifth Joint Conference on Agriculture, Food, and the Environment, June 17-18, 1996, Padova,," Working Papers 14368, University of Minnesota, Center for International Food and Agricultural Policy.
    • Handle: RePEc:ags:umciwp:14368
    DOI: 10.22004/ag.econ.14368
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/14368/files/wp9646b.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.14368?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
    ---><---

    References listed on IDEAS

    as
    1. Laffont, Jean-Jacques & Tirole, Jean, 1987. "Auctioning Incentive Contracts," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 921-937, October.
    2. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
    3. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
    4. Seagraves, J.A. & Easter, K. William, 1982. "Pricing for Irrigation Water," Economic Reports 8445, University of Minnesota, Department of Applied Economics.
    Full references (including those not matched with items on IDEAS)

    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. Stoughton, Neal M. & Zechner, Josef, 2007. "Optimal capital allocation using RAROC(TM) and EVA(R)," Journal of Financial Intermediation, Elsevier, vol. 16(3), pages 312-342, July.
    2. B. Caillaud & R. Guesnerie & P. Rey & J. Tirole, 1988. "Government Intervention in Production and Incentives Theory: A Review of Recent Contributions," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 1-26, Spring.
    3. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 27, pages 1557-1700, Elsevier.
    4. Koray, Semih & Saglam, Ismail, 2005. "Learning in Bayesian Regulation," MPRA Paper 1899, University Library of Munich, Germany.
    5. Laffont, Jean-Jacques, 1994. "The New Economics of Regulation Ten Years After," Econometrica, Econometric Society, vol. 62(3), pages 507-537, May.
    6. repec:ebl:ecbull:v:3:y:2007:i:12:p:1-10 is not listed on IDEAS
    7. Semih Koray & Ismail Saglam, 2005. "The Need for Regulating a Bayesian Regulator," Journal of Regulatory Economics, Springer, vol. 28(1), pages 5-21, July.
    8. Jan Boone & Christoph Schottmüller, 2016. "Procurement with specialized firms," RAND Journal of Economics, RAND Corporation, vol. 47(3), pages 661-687, August.
    9. Hau, Arthur, 2008. "Optimal insurance under costly falsification and costly, inexact verification," Journal of Economic Dynamics and Control, Elsevier, vol. 32(5), pages 1680-1700, May.
    10. Jean Tirole, 2016. "From Bottom of the Barrel to Cream of the Crop: Sequential Screening With Positive Selection," Econometrica, Econometric Society, vol. 84(4), pages 1291-1343, July.
    11. Branco, Fernando, 2002. "Procurement favouritism and technology adoption," European Economic Review, Elsevier, vol. 46(1), pages 73-91, January.
    12. Laffont, Jean-Jacques, 1987. "Toward a Normative Theory of Incentive Contracts between Government and Private Firms," Economic Journal, Royal Economic Society, vol. 97(388a), pages 17-31, Supplemen.
    13. Owen Q. Wu & Volodymyr Babich, 2012. "Unit-Contingent Power Purchase Agreement and Asymmetric Information About Plant Outage," Manufacturing & Service Operations Management, INFORMS, vol. 14(2), pages 245-261, April.
    14. Aguirre, Iñaki & Beitia, Arantza, 2017. "Modelling countervailing incentives in adverse selection models: A synthesis," Economic Modelling, Elsevier, vol. 62(C), pages 82-89.
    15. Pierre Picard, 2012. "Economic Analysis of Insurance Fraud," Working Papers hal-00725561, HAL.
    16. Ismail Saglam, 2016. "On the Pareto Efficiency of a Socially Optimal Mechanism for Monopoly Regulation," IPEK Working Papers 1601, Ipek University, Department of Economics, revised May 2016.
    17. Jean-Jacques Laffont & Jean Tirole, 1988. "Repeated Auctions of Incentive Contracts, Investment, and Bidding Parity with an Application to Takeovers," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 516-537, Winter.
    18. David Martimort & Jérôme Pouyet & Francesco Ricci, 2018. "Extracting information or resource? The Hotelling rule revisited under asymmetric information," RAND Journal of Economics, RAND Corporation, vol. 49(2), pages 311-347, June.
    19. Smith, Rodney B.W. & Tomasi, Theodore D., 1995. "Transaction Costs And Agricultural Nonpoint-Source Water Pollution Control Policies," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(2), pages 1-14, December.
    20. P. Picard, 1998. "Insurance fraud : theory," THEMA Working Papers 98-26, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    21. Sheriff, Glenn, 2006. "Empirical Calibration of a Least-Cost Conservation Reserve Program," 2006 Annual meeting, July 23-26, Long Beach, CA 21420, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

    More about this item

    Keywords

    Resource/Energy Economics and Policy;

    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:ags:umciwp:14368. 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: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/ciumnus.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.