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Incorporating Instream Flow Values Into A Water Market, Richard E. Redding, James J. Murphy, Ariel Dinar, Richard E. Howitt, Stephen J. Rassenti, Marca Weinberg
Incorporating Instream Flow Values Into A Water Market, Richard E. Redding, James J. Murphy, Ariel Dinar, Richard E. Howitt, Stephen J. Rassenti, Marca Weinberg
Richard E. Redding
We use laboratory experiments to test three different water market institutions designed to incorporate instream flow values into the allocation. The institutions are (1) a baseline with fixed minimum flow constraints, (2) an environmental agent contributing to the cost of providing instream flows, and (3) creating an instream flow right in which an environmental agent can sell the right to reduced flows. Using a "smart" computer-coordinated market, we find that direct environmental participation in the market can achieve highly efficient and stable allocations. A particularly attractive and practical feature of the third institution is that it nests the status quo …
Mechanisms For Addressing Third Party Impacts Resulting From Voluntary Water Transfers, Richard E. Redding, James J. Murphy, Ariel Dinar, Richard E. Howitt, Erin Mastrangelo, Stephen Rassenti
Mechanisms For Addressing Third Party Impacts Resulting From Voluntary Water Transfers, Richard E. Redding, James J. Murphy, Ariel Dinar, Richard E. Howitt, Erin Mastrangelo, Stephen Rassenti
Richard E. Redding
This paper uses laboratory experiments to test alternative water market institutions designed to protect third party interests. The institutions tested include taxing mechanisms that raise revenue to compensate affected third parties and a market in which third parties actively participate. The results indicate that there are some important trade-offs in selecting a policy option. Active third party participation in the market is likely to result in free riding that may erode some or all of the efficiency gains, and may introduce volatility into the market. Taxing transfers and compensating third parties offers a promising balance of efficiency, equity and market …