TY - JOUR
T1 - Water allocation under distribution losses
T2 - Comparing alternative institutions
AU - Chakravorty, Ujjayant
AU - Hochman, Eithan
AU - Umetsu, Chieko
AU - Zilberman, David
PY - 2009/2
Y1 - 2009/2
N2 - The distribution of water resources is characterized by increasing returns to scale. Distribution links water generation to its end-use. Standard economic analysis overlooks the interaction among these micro-markets - generation, distribution and end-use. We compare water allocation when there is market power in each micro-market. These outcomes are compared with benchmark cases - social planning and a competitive business-as-usual regime. Simulations suggest that institutions with market power in generation and end-use generate significantly higher welfare than the distribution monopoly and the competitive regime. However, if the policy goal is to maximize the size of the grid, a distribution monopoly is preferred.
AB - The distribution of water resources is characterized by increasing returns to scale. Distribution links water generation to its end-use. Standard economic analysis overlooks the interaction among these micro-markets - generation, distribution and end-use. We compare water allocation when there is market power in each micro-market. These outcomes are compared with benchmark cases - social planning and a competitive business-as-usual regime. Simulations suggest that institutions with market power in generation and end-use generate significantly higher welfare than the distribution monopoly and the competitive regime. However, if the policy goal is to maximize the size of the grid, a distribution monopoly is preferred.
KW - Infrastructure
KW - Market power
KW - Spatial models
KW - Vertical integration
KW - Water markets
UR - http://www.scopus.com/inward/record.url?scp=56949107717&partnerID=8YFLogxK
U2 - 10.1016/j.jedc.2008.04.014
DO - 10.1016/j.jedc.2008.04.014
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AN - SCOPUS:56949107717
SN - 0165-1889
VL - 33
SP - 463
EP - 476
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
IS - 2
ER -
