IDEAS home Printed from https://ideas.repec.org/a/eee/agiwat/v97y2010i9p1326-1332.html

Designing contracts for irrigation water under asymmetric information: Are simple pricing mechanisms enough?

Author

Listed:
  • Viaggi, D.
  • Raggi, M.
  • Bartolini, F.
  • Gallerani, V.

Abstract

A fertile discussion is developing in the EU regarding the application of the Water Framework Directive (60/2000) (WFD), the legislative act that provides the framework for water regulation in Europe and emphasises the role of economic instruments in water policy. The objective of this paper is to provide an evaluation of different instruments designed to deal with the management of water for agriculture, in the perspective of WFD implementation and agricultural price scenarios. The paper focuses on the regulation of mixed source unmetered water and carries out a comparison of flat rate versus differentiated contracts as the policy instrument. The analysis is based on a combination of linear programming and a Principal-Agent model. The empirical model is applied in an agricultural area of Northern Italy. The results show the feasibility of incentive-oriented policy instruments, even in the less sophisticated form of flat rate area payments. They also show the relevance of agricultural market scenarios and policy scenarios in the design of the optimal policy instruments. The adoption of such instruments, however, could require a revision of the role of different institutions involved in water management.

Suggested Citation

  • Viaggi, D. & Raggi, M. & Bartolini, F. & Gallerani, V., 2010. "Designing contracts for irrigation water under asymmetric information: Are simple pricing mechanisms enough?," Agricultural Water Management, Elsevier, vol. 97(9), pages 1326-1332, September.
    • Handle: RePEc:eee:agiwat:v:97:y:2010:i:9:p:1326-1332
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378-3774(10)00111-3
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Chokri Dridi & Madhu Khanna, 2005. "Irrigation Technology Adoption and Gains from Water Trading under Asymmetric Information," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 289-301.
    2. Macho-Stadler, Ines & Perez-Castrillo, J. David, 2001. "An Introduction to the Economics of Information: Incentives and Contracts," OUP Catalogue, Oxford University Press, edition 2, number 9780199243259.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. Juárez-Torres, Miriam & Sánchez-Aragón, Leonardo & Vedenov, Dmitry, . "Weather Derivatives and Water Management in Developing Countries: An Application for an Irrigation District in Central Mexico," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 42(2).
    3. Buchholz, Matthias & Musshoff, Oliver, 2014. "The role of weather derivatives and portfolio effects in agricultural water management," Agricultural Water Management, Elsevier, vol. 146(C), pages 34-44.
    4. Ivan Portoghese & Raffaella Matarrese & Laura Mirra & Giacomo Giannoccaro, 2025. "Assimilating Farmers’ Behaviour in the Development of an ET-Based Irrigation Water-Accounting Model," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 39(14), pages 7749-7774, November.
    5. Rahmatollah Kazemi-nejad & Azam Rezaee & Ramtin Joolaie & Ali Keramatzadeh, 2024. "Investigating the effects of water resources consumption reduction policies on agricultural sustainability in different climates in Iran," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(1), pages 1007-1032, January.
    6. Buchholz, Matthias & Holst, Gesa & Musshoff, Oliver, 2015. "Water and irrigation policy impact assessment using business simulation games: Evidence from northern Germany," DARE Discussion Papers 1505, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    7. Matteo Zavalloni & Meri Raggi & Davide Viaggi, 2016. "Assessing Collective Measures in Rural Policy: The Effect of Minimum Participation Rules on the Distribution of Benefits from Irrigation Infrastructure," Sustainability, MDPI, vol. 9(1), pages 1-19, December.
    8. Mirra, Laura & D'Urso, Guido & Giannoccaro, Giacomo & Cicia, Gianni & Del Giudice, Teresa, 2021. "Water Pricing in Agriculture following the Water Framework Directive: A Systematic Review of the Literature," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 12(04), December.
    9. Giacomo Giannoccaro & Ruggiero Sardaro & Rossella de Vito & Luigi Roselli & Bernardo C. de Gennaro, 2020. "Politiche di gestione della risorsa idrica sotterranea a fini irrigui. Analisi delle preferenze degli agricoltori," Economia agro-alimentare, FrancoAngeli Editore, vol. 22(2), pages 1-27.
    10. Alban Lika & Francesco Galioto & Davide Viaggi, 2017. "Water Authorities’ Pricing Strategies to Recover Supply Costs in the Absence of Water Metering for Irrigated Agriculture," Sustainability, MDPI, vol. 9(12), pages 1-16, November.
    11. Zhisong Chen & Huimin Wang & Xiangtong Qi, 2013. "Pricing and Water Resource Allocation Scheme for the South-to-North Water Diversion Project in China," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(5), pages 1457-1472, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lionel Artige & Rosella Nicolini, 2008. "Memory in Contracts: The experience of the EBRD (1991-2003)," CREPP Working Papers 0803, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège.
    2. Sauer, Johannes & Zilberman, David, "undated". "Innovation Behaviour At Farm Level – Selection And Identification," 83rd Annual Conference, March 30 - April 1, 2009, Dublin, Ireland 51073, Agricultural Economics Society.
    3. Meijerink, Gerdien W., 2007. "If services aren't delivered, people won't pay: the role of measurement problems and monitoring in Payments for Environmental Services," 106th Seminar, October 25-27, 2007, Montpellier, France 7948, European Association of Agricultural Economists.
    4. Li, Yanfei & Yao, Shuntian & Chia, Wai-Mun, 2009. "Endogenous Firm and Information Rent Under Demand Uncertainty," MPRA Paper 13506, University Library of Munich, Germany, revised 16 Feb 2009.
    5. Mattoussi, Wided & Mattoussi, Foued & Larnaout, Afrah, 2023. "Optimal subsidization for the adoption of new irrigation technologies," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1126-1141.
    6. Cintya Lanchimba & Josef Windsperger & Muriel Fadairo, 2018. "Entrepreneurial orientation, risk and incentives: the case of franchising," Small Business Economics, Springer, vol. 50(1), pages 163-180, January.
    7. Florian Fuchs & Volker Lingnau, 2024. "The Homo Economicus as a Prototype of a Psychopath? A Conceptual Analysis and Implications for Business Research and Teaching," Journal of Business Ethics, Springer, vol. 195(4), pages 763-777, December.
    8. Diallo, Marthe, 2008. "Analysis of the Constraints to the Development of a Domestic Improved Seed Potato Industry in Mali," Graduate Research Master's Degree Plan B Papers 50351, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    9. Koundouri, Phoebe & Nauges, Céline & Tzouvelekas, Vangelis, 2009. "The Effect of Production Uncertainty and Information Dissemination of the Diffusion of Irrigation Technologies," TSE Working Papers 09-032, Toulouse School of Economics (TSE).
    10. Hang Xu & Rui Yang & Jianfeng Song, 2021. "Agricultural Water Use Efficiency and Rebound Effect: A Study for China," IJERPH, MDPI, vol. 18(13), pages 1-16, July.
    11. Udo Schneider & Jürgen Zerth, 2011. "Improving Prevention Compliance through Appropriate Incentives: Theoretical Modelling and Empirical Evidence," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 147(1), pages 71-106, March.
    12. Tripathi, Muktak & Ayabakan, Sezgin & Bardhan, Indranil & Banker, Rajiv, 2025. "Performance of risk-based models in value-based healthcare: Evidence from accountable care organizations," Accounting, Organizations and Society, Elsevier, vol. 115(C).
    13. Stine Broch & Suzanne Vedel, 2012. "Using Choice Experiments to Investigate the Policy Relevance of Heterogeneity in Farmer Agri-Environmental Contract Preferences," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(4), pages 561-581, April.
    14. Ciprian MatiÅŸ & Eugenia MatiÅŸ, 2013. "Asymmetric Information In Insurance Field: Some General Considerations," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(15), pages 1-17.
    15. Andal, Emmanuel Genesis T., 2016. "The Economic Incentives of International Conflicts: A Theoretical Exposition," Journal of Economics, Management & Agricultural Development, Journal of Economics, Management & Agricultural Development (JEMAD), vol. 2(01), June.
    16. Taylor, Michael A. & Randall, Alan & Sohngen, Brent, 2001. "Point-Nonpoint Source Pollution Trading Using Collective Performance Incentives," 2001 Annual meeting, August 5-8, Chicago, IL 20776, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Hempelmann, Bernd, 2006. "Optimal franchise contracts with private cost information," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 449-465, March.
    18. Abián García-Rodríguez & Fernando Sánchez-Losada, 2014. "R&D poverty traps," UB School of Economics Working Papers 2014/307, University of Barcelona School of Economics.
    19. Güth, Werner & Pull, Kerstin & Stadler, Manfred, 2014. "Delegation, worker compensation, and strategic competition," University of Tübingen Working Papers in Business and Economics 67, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    20. Sauer, Johannes & Zilberman, David, "undated". "Innovation behaviour at micro level - selection and identification," CUDARE Working Papers 120636, University of California, Berkeley, Department of Agricultural and Resource Economics.

    More about this item

    Keywords

    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:agiwat:v:97:y:2010:i:9:p:1326-1332. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/agwat .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.