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| Author: | Murphy, J. J.(et al.) |
| Title: | The design of water markets when instream flows have value |
| Journal: | Journal of Environmental Management
2009 : FEB, VOL. 90:2, p. 1089-1096 |
| Index terms: | water resources water supply industry institutions environmental protection |
| Freeterms: | water transfers instream flows experiments |
| Language: | eng |
| Abstract: | The main objective of this article is to design and test a decentralized exchange mechanism that generates the location-specific pricing necessary to achieve efficient allocations in the presence of instream flow values. It is uses laboratory experiments to test three different water market institutions designed to incorporate instream flow values into the allocation mechanism through active participation of an environmental trader. The smart, computer-coordinated market described herein offers the potential to significantly reduce coordination problems and transaction costs associated with finding mutually beneficial trades that satisfy environmental constraints. It is found that direct environmental participation in the market can achieve highly efficient and stable outcomes, although the potential does exist for the environmental agent to influence outcomes. |
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