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Market Power in Water Markets

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  • Erik Ansink

    (IVM, VU University Amsterdam, and Wageningen University)

  • Harold Houba

    (VU University Amsterdam)

Abstract

Forthcoming in 'Journal of Environmental Economics and Management' .Water markets with market power are analysed as multi-market Cournot competition in which the river structure constrains access to local markets and limited resources impose capacity constraints. Conditions for uniqueness are identified. Lerner indices are larger under binding resource constraints. The number of cases explodes in the number of local markets. Under quadratic benefit functions and symmetric constant marginal extraction costs, closed-form solutions for selected cases are derived, and numerical implementation through a single optimization program is available. Upstream locations face less competition than downstream. Observed price patterns in the Goulburn-Murray Irrigation District are consistent with the theoretical results.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-054/1.

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Date of creation: 27 May 2010
Date of revision: 16 May 2011
Handle: RePEc:dgr:uvatin:20100054

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Web page: http://www.tinbergen.nl

Related research

Keywords: Water markets; oligopoly; market power; Cournot-Walras equilibrium;

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  1. Chakravorty, Ujjayant & Hochman, Eithan & Umetsu, Chieko & Zilberman, David, 2009. "Water allocation under distribution losses: Comparing alternative institutions," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 463-476, February.
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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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