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Effects of competition on environmental water buyback auctions

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  • Iftekhar, M.S.
  • Tisdell, J.G.
  • Connor, J.D.

Abstract

As water extractions from the world's rivers have grown, flows available for the environment have dwindled. In many parts of the world governments are now considering strategies to restore environmental flows. One strategy is for a government to buyback water from irrigators for the environment with annual lease arrangements. In this paper we have studied the role of market competition (in terms of environmental water demand and number of sellers) in determining the performance of multi-round environmental water buyback auctions using a stylized agent based simulation model. The results suggest that rent extraction lowers as the number of bidders increase and water demand decreases. However, we find significant differences in the way changes in demand and supply influence rent extraction. Reduction in water demand has much greater impact on rent extraction than increasing the number of bidders in the market. Further, in wet years (when supply is abundant relative to demand) bidders engage in more competitive bidding compared to cases in dry years. Results from the analysis indicate that government agencies benefit more from arranging buyback tenders (1) with a small target relative to tenders with a large bidder population and (2) with greater opportunities for the bidders to learn from the market in wet years compared to dry years.

Suggested Citation

  • Iftekhar, M.S. & Tisdell, J.G. & Connor, J.D., 2013. "Effects of competition on environmental water buyback auctions," Agricultural Water Management, Elsevier, vol. 127(C), pages 59-73.
    • Handle: RePEc:eee:agiwat:v:127:y:2013:i:c:p:59-73
    DOI: 10.1016/j.agwat.2013.05.015
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    Cited by:

    1. Pérez-Blanco, C. D & Standardi, G., 2019. "Farm waters run deep: a coupled positive multi-attribute utility programming and computable general equilibrium model to assess the economy-wide impacts of water buyback," Agricultural Water Management, Elsevier, vol. 213(C), pages 336-351.
    2. Pérez-Blanco, C.D. & Gutiérrez-Martín, C., 2017. "Buy me a river: Use of multi-attribute non-linear utility functions to address overcompensation in agricultural water buyback," Agricultural Water Management, Elsevier, vol. 190(C), pages 6-20.
    3. Md. Sayed Iftekhar & John G. Tisdell, 2016. "An Agent Based Analysis of Combinatorial Bidding for Spatially Targeted Multi-Objective Environmental Programs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 64(4), pages 537-558, August.
    4. Perez Blanco, C.D., 2018. "Waters run deep: A coupled Revealed Preference and CGE model to assess the economy-wide impacts of agricultural water buyback," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277028, International Association of Agricultural Economists.
    5. Courtney M. Regan & Jeffery D. Connor & Md Sayed Iftekhar, 2023. "An economic assessment of options for operating within plantation forestry water entitlements and tightening cap and trade policy," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(2), pages 303-322, April.
    6. Pérez-Blanco, C. Dionisio & Sapino, Francesco & Saiz-Santiago, Pablo, 2023. "First-degree price discrimination water bank to reduce reacquisition costs and enhance economic efficiency in agricultural water buyback," Ecological Economics, Elsevier, vol. 205(C).
    7. Carlos Mario Gómez Gómez & C. D. Pérez-Blanco & David Adamson & Adam Loch, 2018. "Managing Water Scarcity at a River Basin Scale with Economic Instruments," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-31, January.
    8. Aghaie, Vahid & Alizadeh, Hosein & Afshar, Abbas, 2020. "Agent-Based hydro-economic modelling for analysis of groundwater-based irrigation Water Market mechanisms," Agricultural Water Management, Elsevier, vol. 234(C).
    9. Iftekhar, M.S. & Tisdell, J.G., 2014. "Wildlife corridor market design: An experimental analysis of the impact of project selection criteria and bidding flexibility," Ecological Economics, Elsevier, vol. 104(C), pages 50-60.
    10. Le Lan & Md Sayed Iftekhar & James Fogarty & Steven Schilizzi, 2021. "Auctions for buying back groundwater for environmental purposes: Which design performs better?," Journal of Agricultural Economics, Wiley Blackwell, vol. 72(3), pages 931-948, September.
    11. Justin Dijk & Erik Ansink, 2018. "Conservation auctions, collusion and the endowment effect," Tinbergen Institute Discussion Papers 18-093/VIII, Tinbergen Institute.

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