IDEAS home Printed from https://ideas.repec.org/a/spr/waterr/v27y2013i2p475-484.html

An Analysis on the Transaction Costs of Water Markets under DPA and UPA Auctions

Author

Listed:
  • Li Zhang

  • Shao Jia
  • Chi Leung
  • Li Guo

Abstract

The potential revenues of water right transactions can be substantial in theory, but the actual receipts are generally limited in practice. This difference is attributable to the presence of other factors influencing the operation of water markets. In this paper, we study the discriminatory-price and the uniform-price sealed-bid procurement auction for divisible items in water right trade wherein commissions define the costs of transactions. We further analyze the quantitative relationships between transaction costs and the revenues of sellers, buyers, and of the auction site. The findings indicate that transaction costs do not affect the margins of bidders because of reluctance to raise quotations. The bidders bear the commissions but impose the transaction costs outwardly on the seller who as a result suffers from reduced revenues. Of the two types the uniform-price auction generates more revenue for sellers than the discriminatory-price auction. Copyright Springer Science+Business Media Dordrecht 2013

Suggested Citation

  • Li Zhang & Shao Jia & Chi Leung & Li Guo, 2013. "An Analysis on the Transaction Costs of Water Markets under DPA and UPA Auctions," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(2), pages 475-484, January.
    • Handle: RePEc:spr:waterr:v:27:y:2013:i:2:p:475-484
    DOI: 10.1007/s11269-012-0197-8
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11269-012-0197-8
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11269-012-0197-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

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

    for a different version of it.

    References listed on IDEAS

    as
    1. Dahlman, Carl J, 1979. "The Problem of Externality," Journal of Law and Economics, University of Chicago Press, vol. 22(1), pages 141-162, April.
    2. Bonnie G. Colby, 1990. "Transactions Costs and Efficiency in Western Water Allocation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(5), pages 1184-1192.
    3. H. Wang & Y. Dong & Y. Wang & Q. Liu, 2008. "Water Right Institution and Strategies of the Yellow River Valley," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 22(10), pages 1499-1519, October.
    4. Jaime F. Zender & James J.D. Wang, 2002. "Auctioning divisible goods," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 19(4), pages 673-705.
    5. Ronald C. Griffin, 1991. "The Welfare Analytics of Transaction Costs, Externalities, and Institutional Choice," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 601-614.
    6. Stavins Robert N., 1995. "Transaction Costs and Tradeable Permits," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 133-148, September.
    7. Barzel,Yoram, 1997. "Economic Analysis of Property Rights," Cambridge Books, Cambridge University Press, number 9780521597135, February.
    8. Howitt, Richard E., 1994. "Empirical analysis of water market institutions: The 1991 California water market," Resource and Energy Economics, Elsevier, vol. 16(4), pages 357-371, November.
    9. Hearne, Robert R. & William Easter, K., 1997. "The economic and financial gains from water markets in Chile," Agricultural Economics, Blackwell, vol. 15(3), pages 187-199, January.
    10. Klaes, Matthias, 2000. "The Birth of the Concept of Transaction Costs: Issues and Controversies," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 9(4), pages 567-593, December.
    11. R. Maria Saleth & Ariel Dinar, 2004. "The Institutional Economics of Water," Books, Edward Elgar Publishing, number 3443.
    12. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
    13. Rosegrant, Mark W. & Binswanger, Hans P., 1994. "Markets in tradable water rights: Potential for efficiency gains in developing country water resource allocation," World Development, Elsevier, vol. 22(11), pages 1613-1625, November.
    14. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
    15. repec:wbk:wbpubs:14884 is not listed on IDEAS
    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. Guo, Jiantao & Zhang, Juliang & Cheng, T.C.E., 2024. "Truthful multi-unit double auction with transaction costs and sellers’ changing marginal costs," International Journal of Production Economics, Elsevier, vol. 278(C).
    2. G. Donoso & O. Melo & C. Jordán, 2014. "Estimating Water Rights Demand and Supply: Are Non-market Factors Important?," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(12), pages 4201-4218, September.
    3. Congjun Rao & Yong Zhao & Junjun Zheng & Mark Goh & Cheng Wang, 2017. "Bidding Behavior and Equilibrium Excursion of Uniform Price Auction Mechanism," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(06), pages 1-17, December.

    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. McCann, Laura M.J. & Easter, K. William, 1998. "Estimating Transaction Costs Of Alternative Policies To Reduce Phosphorous Pollution In The Minnesota River," Staff Papers 13919, University of Minnesota, Department of Applied Economics.
    2. McCann, Laura & Colby, Bonnie & Easter, K. William & Kasterine, Alexander & Kuperan, K.V., 2005. "Transaction cost measurement for evaluating environmental policies," Ecological Economics, Elsevier, vol. 52(4), pages 527-542, March.
    3. Loch, Adam & Wheeler, Sarah Ann & Settre, Claire, 2018. "Private Transaction Costs of Water Trade in the Murray–Darling Basin," Ecological Economics, Elsevier, vol. 146(C), pages 560-573.
    4. Mani Rouhi Rad & Taro Mieno & Nicholas Brozović, 2022. "The Role of Search Frictions and Trading Ratios in Tradable Permit Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(1), pages 101-132, May.
    5. Garrick, Dustin & Whitten, Stuart M. & Coggan, Anthea, 2013. "Understanding the evolution and performance of water markets and allocation policy: A transaction costs analysis framework," Ecological Economics, Elsevier, vol. 88(C), pages 195-205.
    6. Skurray, James H. & Roberts, E.J. & Pannell, David J., "undated". "Hydrological challenges to groundwater trading: lessons from south-west Western Australia," Working Papers 161073, University of Western Australia, School of Agricultural and Resource Economics.
    7. Zhang, Chunmei & Zhao, Yuanfeng & Xiu, Changbai, 2020. "Does Water Rights Trading Promote Economic Efficiency of Water Resource? : A global literature review," Conference papers 333128, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    8. Wim Marneffe & Lode Vereeck, 2011. "The meaning of regulatory costs," European Journal of Law and Economics, Springer, vol. 32(3), pages 341-356, December.
    9. Bajaj, Akshi & Singh, S.P. & Nayak, Diptimayee, 2022. "Impact of water markets on equity and efficiency in irrigation water use: A systematic review and meta-analysis," Agricultural Water Management, Elsevier, vol. 259(C).
    10. Deng, Xiaohong & Xu, Zhongmin & Song, Xiaoyu & Zhou, Jian, 2017. "Transaction costs associated with agricultural water trading in the Heihe River Basin, Northwest China," Agricultural Water Management, Elsevier, vol. 186(C), pages 29-39.
    11. Georgina W. Njiraini & Djiby Racine Thiam & Anthea Coggan, 2017. "The Analysis of Transaction Costs in Water Policy Implementation in South Africa: Trends, Determinants and Economic Implications," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 1-30, January.
    12. Li, Zhi & Zhang, Xin & Xu, Wenchao, "undated". "Water Transactions along a River: A Multilateral Bargaining Experiment with a Veto Player," 2018 Annual Meeting, August 5-7, Washington, D.C. 274048, Agricultural and Applied Economics Association.
    13. Nijiraini, Georgina & Thiam, Djiby, 2015. "Estimating transaction costs associated with water policy implementation in South Africa," 2015 Conference, August 9-14, 2015, Milan, Italy 212585, International Association of Agricultural Economists.
    14. Reto Foellmi & Urs Meister, 2012. "Enhancing the Efficiency of Water Supply—Product Market Competition Versus Trade," Journal of Industry, Competition and Trade, Springer, vol. 12(3), pages 299-324, September.
    15. Ranaldo, Angelo & Rossi, Enzo, 2016. "Uniform-price Auctions for Swiss Government Bonds: Origin and Evolution," Working Papers on Finance 1609, University of St. Gallen, School of Finance.
    16. repec:iwt:bosers:h042163 is not listed on IDEAS
    17. Heindl, Peter, 2012. "Transaction costs and tradable permits: Empirical evidence from the EU emissions trading scheme," ZEW Discussion Papers 12-021, ZEW - Leibniz Centre for European Economic Research.
    18. Ereney Hadjigeorgalis, 2009. "A Place for Water Markets: Performance and Challenges," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 31(1), pages 50-67.
    19. Foundjem-Tita, Divine & Speelman, Stijn & D'Haese, Marijke & Degrande, Ann & Van Huylenbroeck, Guido & Van Damme, Patrick & Tchoundjeu, Zac, 2014. "A tale of transaction costs and forest law compliance: Trade permits for Non Timber Forests Products in Cameroon," Forest Policy and Economics, Elsevier, vol. 38(C), pages 132-142.
    20. Ellen M. Bruno & Richard J. Sexton, 2020. "The Gains from Agricultural Groundwater Trade and the Potential for Market Power: Theory and Application," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(3), pages 884-910, May.
    21. Debaere, Peter & Li, Tianshu, "undated". "The Effects of Water Markets: Evidence from the Rio Grande," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259187, Agricultural and Applied Economics Association.

    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:spr:waterr:v:27:y:2013:i:2:p:475-484. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.