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Water allocation, crop choice, and priority services
Author(s) -
Salanié François,
Zaporozhets Vera
Publication year - 2022
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12538
Subject(s) - rationing , ex ante , economics , economic shortage , water scarcity , scarcity , microeconomics , optimal allocation , set (abstract data type) , natural resource economics , business , agriculture , computer science , ecology , health care , linguistics , philosophy , mathematical optimization , mathematics , government (linguistics) , biology , programming language , macroeconomics , economic growth
We analyze the problem of allocating irrigation water among heterogeneous farmers when water supply is stochastic. If farmers are risk‐neutral, a spot market for water is efficient; while the oft‐used uniform rationing system is inefficient, both ex ante and ex post. Indeed, we show that it leads farmers to overexpose to risk, thus making shortages more severe and more frequent in case of drought. We propose instead a regulation by priority classes extending Wilson, and we derive an efficiency result. We characterize the set of farmers that would win or lose from such a reform. We also argue that a system of priority classes may be preferred to a spot market system, because scarcity is easier to manage ex ante than ex post, and because this system facilitates the supply of insurance to risk‐averse agents.