Water allocation under distribution losses: Comparing alternative institutions
AbstractThe 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 InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 33 (2009)
Issue (Month): 2 (February)
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Web page: http://www.elsevier.com/locate/jedc
Infrastructure Market power Spatial models Vertical integration Water markets;
Other versions of this item:
- Chakravorty, Ujjayant & Hochman, Eithan & Umetsu, Chieko & Zilberman, David, 2009. "Water Allocation Under Distribution Losses: Comparing Alternative Institutions," Working Papers 2009-8, University of Alberta, Department of Economics.
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
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