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Capturing benefits from water entitlement trade in salinity affected areas: A role for trading houses?
Author(s) -
Bell Rosalyn
Publication year - 2002
Publication title -
australian journal of agricultural and resource economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.683
H-Index - 49
eISSN - 1467-8489
pISSN - 1364-985X
DOI - 10.1111/1467-8489.t01-1-00039
Subject(s) - entitlement (fair division) , outcome (game theory) , competition (biology) , salinity , business , water trading , social benefits , set (abstract data type) , economics , microeconomics , natural resource economics , industrial organization , ecology , computer science , quality (philosophy) , water conservation , water resources , philosophy , programming language , epistemology , biology
While there is potential for substantial benefits from water entitlement trade, external effects such as salinity may mean that traders cannot capture these benefits. This paper demonstrates that by creating a trading house as a single seller of water entitlements, with trade profits distributed to buyers, it is possible to achieve an allocation of entitlements which gives a social outcome higher than that possible from atomistic competition for entitlements. Such an outcome may be comparable to an optimally set uniform charge for water entitlements, but the trading house mechanism has the advantage that it makes use of trade to generate information on the optimal level of charging in the presence of salinity.