We analyze the problem of allocating irrigation water among het- erogenous farmers when water supply is stochastic. If farmers are risk-neutral, a spot market for water is e¢ cient; while the oft-used uniform rationing system is ine¢ cient, both ex-ante and ex-post. In- deed, we show that it leads farmers to overexpose to risk, thus making shortages more severe and more frequent in case of drought. We pro- pose instead a regulation by priority classes extending Wilson (1989), and we derive an e¢ ciency result. We characterize the set of farmers that would win or loose 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.
Water; Irrigation; Priority Classes; Rationing;
- Q15: Land Ownership and Tenure • Land Reform • Land Use • Irrigation • Agriculture and Environment
- Q25: Water
- D47: Market Design
François Salanié et Vera Zaporozhets, « Water allocation, crop choice, and priority services », Journal of Public Economic Theory, vol. 24, n° 1, février 2022, p. 140–158.
François Salanié et Vera Zaporozhets, « Water Allocation, Crop Choice, and Priority Services », TSE Working Paper, n° 21-1235, juillet 2021.
TSE Working Paper, n° 21-1235, juillet 2021