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Market power in water markets

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Author Info

  • Ansink, Erik
  • Houba, Harold

Abstract

We model market power in water markets as multi-market Cournot competition with a river structure. Suppliers are connected through water balances, which imposes resource constraints, and they are connected to heterogeneous water users via a water delivery infrastructure. Our model captures a wide range of specific water market structures. We establish conditions for existence of an equilibrium and we assess the effects of market power on water extraction, delivery, and water prices. Although the monopoly case is similar to standard economic theory, three other specific water market structures illustrate that standard intuition has to be revisited.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 64 (2012)
Issue (Month): 2 ()
Pages: 237-252

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Handle: RePEc:eee:jeeman:v:64:y:2012:i:2:p:237-252

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Web page: http://www.elsevier.com/locate/inca/622870

Related research

Keywords: Water markets; Oligopoly; Market power; Cournot–Walras equilibrium;

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References

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  1. 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.
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  8. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
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  11. R. Maria Saleth & John B. Braden & J. Wayland Eheart, 1991. "Bargaining Rules for a Thin Spot Water Market," Land Economics, University of Wisconsin Press, vol. 67(3), pages 326-339.
  12. Ralph Turvey, 1976. "Analyzing the Marginal Cost of Water Supply," Land Economics, University of Wisconsin Press, vol. 52(2), pages 158-168.
  13. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  14. Ronald C. Griffin, 2006. "Water Resource Economics: The Analysis of Scarcity, Policies, and Projects," MIT Press Books, The MIT Press, edition 1, volume 1, number 026207267x.
  15. Sheila M. Olmstead, 2010. "The Economics of Managing Scarce Water Resources," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(2), pages 179-198, Summer.
  16. 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.
  17. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716.
  18. Stephen Holland, 2006. "Privatization of Water-Resource Development," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 34(2), pages 291-315, 06.
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Cited by:
  1. repec:dgr:uvatin:2013051 is not listed on IDEAS
  2. Harold Houba & Erik Ansink, 2013. "Sustainable Agreements on Stochastic River Flow," Tinbergen Institute Discussion Papers 13-182/II, Tinbergen Institute.

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