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Right-to-Choose Auctions: A Field Study of Water Markets in the Limari Valley of Chile

  • Jonathan E. Alevy

    ()

    (Department of Economics, University of Alaska Anchorage)

  • Oscar Cristi

    ()

    (CIEN, Universidad del Desarrollo)

  • Oscar Melo

    ()

    (Department of Agricultural Economics, Pontificia Universidad Catolica de Chile)

Field experiments were conducted with farmers in the Limarí Valley of Chile to test extant theory on right-to-choose auctions. Water volumes that differed by reservoir source and time of availability were offered for sale by the research team. The auctions were supplemented by protocols to elicit risk and time preferences of bidders. We find that the right-to-choose auctions raise significantly more revenue than the benchmark sequential auction. Risk attitudes explain a substantial amount of the difference in bidding between auction institutions, consonant with received theory. The auction bidding revealed distinct preferences for water types, which has implications for market re-design.

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Paper provided by University of Alaska Anchorage, Department of Economics in its series Working Papers with number 2010-04.

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Date of creation: 2010
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Handle: RePEc:ala:wpaper:2010-04
Contact details of provider: Web page: http://www.cbpp.uaa.alaska.edu/CBPPHome/DepartmentsandMajors/Economics.aspx

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