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Risk Aversion and Urban Water Decisions

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  • Freebairn, John W.

Abstract

Application of the product characteristics model and the finance portfolio choice model are used to illustrate the important effects of risk aversion held by decision makers in making decisions in the urban water markets. Decision makers face uncertainty about water demand, water inflows and supply costs, and about government policy. Relative to risk neutrality assumed in many models, risk aversion changes decisions about the management of available water supply infrastructure, and about the form and timing of supply augmentation options. Recognition of heterogeneity of buyer preference with respect to risk suggest efficiency gains from offering a variety of cost-security of supply characteristic packages to water buyers.

Suggested Citation

  • Freebairn, John W., 2012. "Risk Aversion and Urban Water Decisions," 2012 Conference (56th), February 7-10, 2012, Fremantle, Australia 124206, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare12:124206
    DOI: 10.22004/ag.econ.124206
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    References listed on IDEAS

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    Cited by:

    1. Edwards, Geoff W., 2012. "The Desalination Plant, The North-South Pipeline And The Welfare Of Melburnians," 2012 Conference (56th), February 7-10, 2012, Fremantle, Australia 124292, Australian Agricultural and Resource Economics Society.

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