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Article
Water allocation under distribution losses: comparing alternative institutions
Journal of Economic Dynamics and Control (2009)
  • Ujjayant N Chakravorty, Tufts University
  • Eithan Hochman
  • Chieko Umetsu
  • David Zilberman
Abstract
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.
Keywords
  • Infrastructure,
  • Market power,
  • Spatial models,
  • Vertical integration,
  • Water markets
Publication Date
2009
Citation Information
Ujjayant N Chakravorty, Eithan Hochman, Chieko Umetsu and David Zilberman. "Water allocation under distribution losses: comparing alternative institutions" Journal of Economic Dynamics and Control (2009)
Available at: http://works.bepress.com/chakravorty/13/