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Water allocation under distribution losses: Comparing alternative institutions

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  • Chakravorty, Ujjayant
  • Hochman, Eithan
  • Umetsu, Chieko
  • Zilberman, David

Abstract

The distribution of water resources is characterized by increasing returns to scale. Distribution links water generation to its end-use. Standard economic analysis overlooks the interaction among these micro-markets - generation, distribution and end-use. We compare water allocation when there is market power in each micro-market. These outcomes are compared with benchmark cases - social planning and a competitive business-as-usual regime. Simulations suggest that institutions with market power in generation and end-use generate significantly higher welfare than the distribution monopoly and the competitive regime. However, if the policy goal is to maximize the size of the grid, a distribution monopoly is preferred.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 33 (2009)
Issue (Month): 2 (February)
Pages: 463-476

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Handle: RePEc:eee:dyncon:v:33:y:2009:i:2:p:463-476

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Web page: http://www.elsevier.com/locate/jedc

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Keywords: Infrastructure Market power Spatial models Vertical integration Water markets;

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References

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  1. Pranab Bardhan & Dilip Mookherjee, 2006. "Decentralisation and Accountability in Infrastructure Delivery in Developing Countries," Economic Journal, Royal Economic Society, vol. 116(508), pages 101-127, 01.
  2. 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.
  3. Crampes, C. & Moreaux, M., 2001. "Water resource and power generation," International Journal of Industrial Organization, Elsevier, vol. 19(6), pages 975-997, May.
  4. Robert Wilson, 2002. "Architecture of Power Markets," Econometrica, Econometric Society, vol. 70(4), pages 1299-1340, July.
  5. Chakravorty Ujjayant & Hochman Eithan & Zilberman David, 1995. "A Spatial Model of Optimal Water Conveyance," Journal of Environmental Economics and Management, Elsevier, vol. 29(1), pages 25-41, July.
  6. Chakravorty, Ujjayant & Umetsu, Chieko, 2003. "Basinwide water management: a spatial model," Journal of Environmental Economics and Management, Elsevier, vol. 45(1), pages 1-23, January.
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Cited by:
  1. Erik Ansink & Harold Houba, 2010. "Market Power in Water Markets," Tinbergen Institute Discussion Papers 10-054/1, Tinbergen Institute, revised 16 May 2011.
  2. Ansink, Erik & Houba, Harold, 2012. "Market power in water markets," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 237-252.

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