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How do Markets Manage Water Resources? An Experiment

  • Aurora García-Gallego

    ()

  • Nikolaos Georgantzís

    ()

  • Roberto Hernán-González

    ()

  • Praveen Kujal

    ()

We experimentally test how a private monopoly, a duopoly and a public utility allocate water of differing qualities to households and farmers. Most of our results are in line with the theoretical predictions. Overexploitation of the resources is observed independently of the market structure. Stock depletion for the public utility is the fastest, followed by the private duopoly and private monopoly. On the positive aspects of centralized public management, we find that the average quality to price ratio offered by the public monopoly is substantially higher than that offered by the private monopoly or duopoly. Copyright Springer Science+Business Media B.V. 2012

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File URL: http://hdl.handle.net/10.1007/s10640-012-9545-7
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Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 53 (2012)
Issue (Month): 1 (September)
Pages: 1-23

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Handle: RePEc:kap:enreec:v:53:y:2012:i:1:p:1-23
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100263

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  1. Alberto Garrido, 2007. "Water markets design and evidence from experimental economics," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 38(3), pages 311-330, November.
  2. Arlington W. Williams & John O. Ledyard & Steven Gjerstad & Vernon L. Smith, 2000. "Concurrent trading in two experimental markets with demand interdependence," Economic Theory, Springer, vol. 16(3), pages 511-528.
  3. Mason, Charles F. & Phillips, Owen R., 1997. "Mitigating the Tragedy of the Commons through Cooperation: An Experimental Evaluation," Journal of Environmental Economics and Management, Elsevier, vol. 34(2), pages 148-172, October.
  4. Rassenti, Stephen & Reynolds, Stanley S. & Smith, Vernon L. & Szidarovszky, Ferenc, 2000. "Adaptation and convergence of behavior in repeated experimental Cournot games," Journal of Economic Behavior & Organization, Elsevier, vol. 41(2), pages 117-146, February.
  5. Smith, Vernon L, 1976. "Experimental Economics: Induced Value Theory," American Economic Review, American Economic Association, vol. 66(2), pages 274-79, May.
  6. Yang, Hong & Zhang, Xiaohe & Zehnder, Alexander J. B., 2003. "Water scarcity, pricing mechanism and institutional reform in northern China irrigated agriculture," Agricultural Water Management, Elsevier, vol. 61(2), pages 143-161, June.
  7. Walker, James M & Gardner, Roy, 1992. "Probabilistic Destruction of Common-Pool Resources: Experimental Evidence," Economic Journal, Royal Economic Society, vol. 102(414), pages 1149-61, September.
  8. Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
  9. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  10. James Murphy & Ariel Dinar & Richard Howitt & Steven Rassenti & Vernon Smith, 2000. "The Design of ``Smart'' Water Market Institutions Using Laboratory Experiments," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 17(4), pages 375-394, December.
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