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Market power in water markets

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  • Ansink, Erik
  • Houba, Harold

Abstract

We model market power in water markets as multi-market Cournot competition with a river structure. Suppliers are connected through water balances, which imposes resource constraints, and they are connected to heterogeneous water users via a water delivery infrastructure. Our model captures a wide range of specific water market structures. We establish conditions for existence of an equilibrium and we assess the effects of market power on water extraction, delivery, and water prices. Although the monopoly case is similar to standard economic theory, three other specific water market structures illustrate that standard intuition has to be revisited.

Suggested Citation

  • Ansink, Erik & Houba, Harold, 2012. "Market power in water markets," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 237-252.
  • Handle: RePEc:eee:jeeman:v:64:y:2012:i:2:p:237-252
    DOI: 10.1016/j.jeem.2011.10.002
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    Cited by:

    1. Houba, Harold & van der Laan, Gerard & Zeng, Yuyu, 2014. "Asymmetric Nash Solutions in the River Sharing Problem," Strategic Behavior and the Environment, now publishers, vol. 4(4), pages 321-360, December.
    2. Elham Erfanian & Alan R. Collins, 2017. "Charges for Water and Access: What Explains the Differences in West Virginia Municipalities?," Working Papers Working Paper 2017-02, Regional Research Institute, West Virginia University.
    3. Ansink, Erik & Houba, Harold, 2016. "Sustainable agreements on stochastic river flow," Resource and Energy Economics, Elsevier, vol. 44(C), pages 92-117.
    4. Adriana V. Madzharov & Suresh Ramanathan & Lauren G. Block, 2016. "The Halo Effect of Product Color Lightness on Hedonic Food Consumption," Journal of the Association for Consumer Research, University of Chicago Press, vol. 1(4), pages 579-591.
    5. Erik Ansink & Harold Houba, 2014. "The Economics of Transboundary River Management," Tinbergen Institute Discussion Papers 14-132/VIII, Tinbergen Institute.
    6. Aneel Karnani & Brent McFerran & Anirban Mukhopadhyay, 2016. "The Obesity Crisis as Market Failure: An Analysis of Systemic Causes and Corrective Mechanisms," Journal of the Association for Consumer Research, University of Chicago Press, vol. 1(3), pages 445-470.

    More about this item

    Keywords

    Water markets; Oligopoly; Market power; Cournot–Walras equilibrium;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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