Managing a duopolistic water market with confirmed proposals : an experiment Articles uri icon

authors

  • GARCIA GALLEGO, A.
  • GEORGANTZIS, N.
  • Hernan Gonzalez, R
  • KUJAL, PRAVEEN

publication date

  • March 2012

start page

  • 189

end page

  • 213

issue

  • extra 1

volume

  • 70

International Standard Serial Number (ISSN)

  • 0034-9712

Electronic International Standard Serial Number (EISSN)

  • 1988-429X

abstract

  • We report results from experimental water markets in which owners of two different sources of water supply water to households and farmers. The final water quality consumed by each type of consumer is determined through mixing of qualities from two different resources. We compare the standard duopolistic market structure with an alternative market clearing mechanism inspired by games with confirmed strategies (which have been shown to yield collusive outcomes). As in the static case, complex dynamic markets operating under a confirmed proposals protocol yield less efficient outcomes because coordination among independent suppliers has the usual effects of restricting output and increasing prices to the users. Our results suggest that, when market mechanisms are used to allocate water to its users, the rule of thumb used by competition authorities can also serve as a guide towards water market regulation

keywords

  • allocation of water; dynamic duopoly; endogenous water quality; games with confirmed proposals