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Do Security-differentiated Water Rights Improve Efficiency?

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  • Marianne LEFEBVRE
  • Lata GANGADHARAN
  • Sophie THOYER

Abstract

Most existing water markets combine water rights trading and water allocation trading. Offering different levels of security for rights can make the market more sophisticated and allow water users to manage the risks of supply uncertainty better. We compare results from a laboratory experiment with two water right designs, one with a unique security level and another with two security levels. We find that a two security levels system improves both allocative eciency and risk management, but only when transactions costs are higher in the market for water allocation than in the market for water rights.

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File URL: http://www.lameta.univ-montp1.fr/Documents/DR2011-14.pdf
File Function: Second version, 2012
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Bibliographic Info

Paper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 11-14.

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Length: 39 pages
Date of creation: Jun 2011
Date of revision: Jun 2012
Handle: RePEc:lam:wpaper:11-14

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Keywords: Crude Oil Pricing; Currency Basket; OPEC; Exchange Rate of Dollar; Euros; Yen.;

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References

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Cited by:
  1. Kristiana Hansen & Jonathan Kaplan & Stephan Kroll, 2014. "Valuing Options in Water Markets: A Laboratory Investigation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 57(1), pages 59-80, January.
  2. Zuo, Alec & Nauges, Celine & Wheeler, Sarah, 2012. "Water trading as a risk-management tool for farmers: new empirical evidence from the Australian water market," Risk and Sustainable Management Group Working Papers 149885, University of Queensland, School of Economics.

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