Water rights for variable supplies

The relative merits of different systems of property rights to allocate water among different extractive uses are evaluated for the case where variability of supply is important. Three systems of property rights are considered. In the first, variable supply is dealt with through the use of water entitlements defined as shares of the total quantity available. In the second, there are two types of water entitlements, one for water with a high security of supply and the other a lower security right for the residual supply. The third is a system of entitlements specified as state-contingent claims. With zero transaction costs, all systems are efficient. In the realistic situation where transaction costs matter, the system based on state-contingent claims is globally optimal, and the system with high-security and lower security entitlements is preferable to the system with share entitlements.


Issue Date:
2006
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/116968
Published in:
Australian Journal of Agricultural and Resource Economics, Volume 50, Issue 3
Page range:
295-312
Total Pages:
18




 Record created 2017-04-01, last modified 2017-08-26

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