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Water Rights for Variable Supplies Creation_Date: 2004-02 Revision_Date: 2005-05


  • John Quiggin

    (Department of Economics, University of Queensland)

  • John Freebairn

    (University of Melbourne)


The relative merits of different property right systems to allocate water among different extractive uses where variability of supply is important are evaluated. Three systems of property rights are considered. In the first, variable supply is dealt with through the use of water rights defined as shares of the total quantity available. In the second, there are two types of water rights, one for water with a high security of supply and the other a low-security right for the residual supply. The third is a system of state-contingent claims. With zero transaction costs, all systems are efficient. In the realistic situation where transaction costs matter, the state-contingent claims system is globally optimal, and the system with high-security and low-security rights is preferable to the system with share allocations.

Suggested Citation

  • John Quiggin & John Freebairn, "undated". "Water Rights for Variable Supplies Creation_Date: 2004-02 Revision_Date: 2005-05," Murray-Darling Program Working Papers WPM04_2, Risk and Sustainable Management Group, University of Queensland.
  • Handle: RePEc:rsm:murray:m04_2

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    Uncertainty; property rights; Murray-Darling;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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