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Title:Rules for water allocation in a small watershed: A game theoretic approach
Author(s):Saleth, R. Maria
Doctoral Committee Chair(s):Braden, John B.
Department / Program:Agricultural and Consumer Economics
Discipline:Agricultural and Consumer Economics
Degree Granting Institution:University of Illinois at Urbana-Champaign
Subject(s):Economics, Agricultural
Abstract:Exchanges of either long term rights (property right transfer) or spot rights (rights rental) to water may result in third party effects that place practical limits on the geographic scope of a water market. The result will be a market with few eligible participants. A "thin" market suffers from strategic manipulation and allocational distortions. Using a game theoretic approach based on multilateral bargaining models, this study addresses the issue of designing trade rules to facilitate smooth functioning of a thin spot rights market operating in a variety of exchange environments.
Six different trade rules were analyzed under 24 exchange environments. Numerical results were based on a hypothetical water market operating in conditions representing the Crane Creek Watershed of Kankakee County, Illinois. The water market equilibria under various trade rules and exchange environments were identified by simulating the multilateral bargaining among the participants. By comparing these equilibria, the relative efficacy of the candidate trade rules was determined.
The results were that a price bidding signal produced maximal gains in most environments and the settlements based on the average of the buyer's and seller's prices performed best in most cases. As the market size increases, the bargaining equilibrium prices resulting from various trade rules converge to the competitive equilibrium prices in all exchange environments.
Issue Date:1989
Rights Information:Copyright 1989 Saleth, R. Maria
Date Available in IDEALS:2011-05-07
Identifier in Online Catalog:AAI8916301
OCLC Identifier:(UMI)AAI8916301

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