Abstract
This paper uses mechanism design theory to propose a mechanism to price irrigation water when farmers are heterogeneous in their production technologies (adverse selection) and their individual water uses are unobserved (moral hazard). Unmetered irrigation water is often priced by imposing per-acre fees on cultivated acreage or by charging per-unit fees on observable inputs or outputs. The offered pricing procedure is based on the observed output and achieves a first-best outcome when implementation is free of transaction costs.
Original language | English |
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Pages (from-to) | 392-403 |
Number of pages | 12 |
Journal | Land Economics |
Volume | 73 |
Issue number | 3 |
DOIs | |
State | Published - Aug 1997 |