IDEAS home Printed from https://ideas.repec.org/a/spr/waterr/v27y2013i2p475-484.html
   My bibliography  Save this article

An Analysis on the Transaction Costs of Water Markets under DPA and UPA Auctions

Author

Listed:
  • Li Zhang
  • Shao Jia
  • Chi Leung
  • Li Guo

Abstract

The potential revenues of water right transactions can be substantial in theory, but the actual receipts are generally limited in practice. This difference is attributable to the presence of other factors influencing the operation of water markets. In this paper, we study the discriminatory-price and the uniform-price sealed-bid procurement auction for divisible items in water right trade wherein commissions define the costs of transactions. We further analyze the quantitative relationships between transaction costs and the revenues of sellers, buyers, and of the auction site. The findings indicate that transaction costs do not affect the margins of bidders because of reluctance to raise quotations. The bidders bear the commissions but impose the transaction costs outwardly on the seller who as a result suffers from reduced revenues. Of the two types the uniform-price auction generates more revenue for sellers than the discriminatory-price auction. Copyright Springer Science+Business Media Dordrecht 2013

Suggested Citation

  • Li Zhang & Shao Jia & Chi Leung & Li Guo, 2013. "An Analysis on the Transaction Costs of Water Markets under DPA and UPA Auctions," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(2), pages 475-484, January.
    • Handle: RePEc:spr:waterr:v:27:y:2013:i:2:p:475-484
    DOI: 10.1007/s11269-012-0197-8
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11269-012-0197-8
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11269-012-0197-8?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. Dahlman, Carl J, 1979. "The Problem of Externality," Journal of Law and Economics, University of Chicago Press, vol. 22(1), pages 141-162, April.
    2. H. Wang & Y. Dong & Y. Wang & Q. Liu, 2008. "Water Right Institution and Strategies of the Yellow River Valley," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 22(10), pages 1499-1519, October.
    3. Ronald C. Griffin, 1991. "The Welfare Analytics of Transaction Costs, Externalities, and Institutional Choice," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 601-614.
    4. Barzel,Yoram, 1997. "Economic Analysis of Property Rights," Cambridge Books, Cambridge University Press, number 9780521597135, February.
    5. Stavins Robert N., 1995. "Transaction Costs and Tradeable Permits," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 133-148, September.
    6. Howitt, Richard E., 1994. "Empirical analysis of water market institutions: The 1991 California water market," Resource and Energy Economics, Elsevier, vol. 16(4), pages 357-371, November.
    7. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
    8. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
    9. R. Maria Saleth & Ariel Dinar, 2004. "The Institutional Economics of Water : A Cross-Country Analysis of Institutions and Performance," World Bank Publications - Books, The World Bank Group, number 14884, December.
    10. 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.
    11. Jaime F. Zender & James J.D. Wang, 2002. "Auctioning divisible goods," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 19(4), pages 673-705.
    12. Hearne, Robert R. & William Easter, K., 1997. "The economic and financial gains from water markets in Chile," Agricultural Economics, Blackwell, vol. 15(3), pages 187-199, January.
    13. Klaes, Matthias, 2000. "The Birth of the Concept of Transaction Costs: Issues and Controversies," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 9(4), pages 567-593, December.
    14. R. Maria Saleth & Ariel Dinar, 2004. "The Institutional Economics of Water," Books, Edward Elgar Publishing, number 3443, December.
    15. Rosegrant, Mark W. & Binswanger, Hans P., 1994. "Markets in tradable water rights: Potential for efficiency gains in developing country water resource allocation," World Development, Elsevier, vol. 22(11), pages 1613-1625, November.
    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. G. Donoso & O. Melo & C. Jordán, 2014. "Estimating Water Rights Demand and Supply: Are Non-market Factors Important?," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(12), pages 4201-4218, September.
    2. Congjun Rao & Yong Zhao & Junjun Zheng & Mark Goh & Cheng Wang, 2017. "Bidding Behavior and Equilibrium Excursion of Uniform Price Auction Mechanism," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(06), pages 1-17, December.

    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. McCann, Laura M.J. & Easter, K. William, 1998. "Estimating Transaction Costs Of Alternative Policies To Reduce Phosphorous Pollution In The Minnesota River," Staff Papers 13919, University of Minnesota, Department of Applied Economics.
    2. McCann, Laura & Colby, Bonnie & Easter, K. William & Kasterine, Alexander & Kuperan, K.V., 2005. "Transaction cost measurement for evaluating environmental policies," Ecological Economics, Elsevier, vol. 52(4), pages 527-542, March.
    3. Loch, Adam & Wheeler, Sarah Ann & Settre, Claire, 2018. "Private Transaction Costs of Water Trade in the Murray–Darling Basin," Ecological Economics, Elsevier, vol. 146(C), pages 560-573.
    4. Li, Zhi & Zhang, Xin & Xu, Wenchao, 2018. "Water Transactions along a River: A Multilateral Bargaining Experiment with a Veto Player," 2018 Annual Meeting, August 5-7, Washington, D.C. 274048, Agricultural and Applied Economics Association.
    5. Narain, V., 2009. "Water rights system as a demand management option: potentials, constraints and prospects," IWMI Books, Reports H042163, International Water Management Institute.
    6. Quentin Grafton & Clay Landry & Gary Libecap & Sam McGlennon & Bob O'Brien, 2010. "An Integrated Assessment of Water Markets: Australia, Chile, China, South Africa and the USA," Centre for Water Economics, Environment and Policy Papers 1009, Centre for Water Economics, Environment and Policy, Crawford School of Public Policy, The Australian National University.
    7. 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.
    8. 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.
    9. Venkatachalam, L., 2008. "Market-based instruments for water allocation in India: issues and the way forward," Conference Papers h042916, International Water Management Institute.
    10. Jian Xie, 2009. "Addressing China's Water Scarcity : Recommendations for Selected Water Resource Management Issues," World Bank Publications - Books, The World Bank Group, number 2585, December.
    11. Skurray, James H. & Roberts, E.J. & Pannell, David J., 2013. "Hydrological challenges to groundwater trading: lessons from south-west Western Australia," Working Papers 161073, University of Western Australia, School of Agricultural and Resource Economics.
    12. Wim Marneffe & Lode Vereeck, 2011. "The meaning of regulatory costs," European Journal of Law and Economics, Springer, vol. 32(3), pages 341-356, December.
    13. Bajaj, Akshi & Singh, S.P. & Nayak, Diptimayee, 2022. "Impact of water markets on equity and efficiency in irrigation water use: A systematic review and meta-analysis," Agricultural Water Management, Elsevier, vol. 259(C).
    14. Deng, Xiaohong & Xu, Zhongmin & Song, Xiaoyu & Zhou, Jian, 2017. "Transaction costs associated with agricultural water trading in the Heihe River Basin, Northwest China," Agricultural Water Management, Elsevier, vol. 186(C), pages 29-39.
    15. Yeti Nisha Madhoo, 2007. "International Trends In Water Utility Regimes," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 78(1), pages 87-135, March.
    16. Georgina W. Njiraini & Djiby Racine Thiam & Anthea Coggan, 2017. "The Analysis of Transaction Costs in Water Policy Implementation in South Africa: Trends, Determinants and Economic Implications," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 1-30, January.
    17. Nijiraini, Georgina & Thiam, Djiby, 2015. "Estimating transaction costs associated with water policy implementation in South Africa," 2015 Conference, August 9-14, 2015, Milan, Italy 212585, International Association of Agricultural Economists.
    18. Kirsten Foss & Nicolai Foss, 2001. "Theoretical isolation in contract theory: suppressing margins and entrepreneurship," Journal of Economic Methodology, Taylor & Francis Journals, vol. 7(3), pages 313-339.
    19. Dinar, Ariel, 2012. "Economy-wide implications of direct and indirect policy interventions in the water sector: lessons from recent work and future research needs," Policy Research Working Paper Series 6068, The World Bank.
    20. Thomas Vendryes, 2014. "Peasants Against Private Property Rights: A Review Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 28(5), pages 971-995, December.

    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:27:y:2013:i:2:p:475-484. 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.