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The Problems of Analysing Markets for Irrigation Water

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  • Davidson, Brian

Abstract

The view that the price of water is too low and that water does not flow to its highest value end use, have led many analysts to conclude that a market for water, in which price can adjust to accommodate changes in the supply and demand for the product, is essential. However, this solution assumes that the market could approach something close to perfect competition, purely by making minor changes within the existing regime of property rights. In this paper it is argued that problems evident in this market stem from a multitude of market failures and characteristics that are particular to it. To understand this case more fully it is necessary to come to terms with the theoretical formulations of the market for water and the practical difficulties associated with it. It is concluded that it may not be possible to obtain an optimal solution in the market for water, as it currently exists. Thus, the solutions to the problems evident in the water market may need to rely on controlling quantity of water that flows through it, even though price is an ideal economiser of information.

Suggested Citation

  • Davidson, Brian, 2004. "The Problems of Analysing Markets for Irrigation Water," 2004 Conference (48th), February 11-13, 2004, Melbourne, Australia 58400, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare04:58400
    DOI: 10.22004/ag.econ.58400
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    References listed on IDEAS

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    1. John Freebairn, 2003. "Principles for the Allocation of Scarce Water," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 203-212, June.
    2. Geoff Edwards, 2003. "Water Policy: Setting the Scene," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 193-202, June.
    3. M. D. Young & J. C. McColl, 2003. "Robust Reform: The Case for a New Water Entitlement System for Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 225-234, June.
    4. Crase, Lin & O'Reilly, Leo & Dollery, Brian, 2000. "Water markets as a vehicle for water reform: the case of New South Wales," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 44(2), pages 1-23.
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    Cited by:

    1. Tirtha Raj Dhakal & Brian Davidson & Bob Farquharson, 2018. "Factors Affecting Collective Actions in Farmer-Managed Irrigation Systems of Nepal," Agriculture, MDPI, vol. 8(6), pages 1-11, June.

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