Market power in California's water market

Françeska Tomori; Erik Ansink; Harold Houba; Nick Hagerty; Charles S. Bos

doi:10.1111/ajae.12434

Market power in California's water market

Françeska Tomori, Erik Ansink^*, Harold Houba, Nick Hagerty, Charles S. Bos

^*Corresponding author for this work

Research output: Contribution to Journal › Article › Academic › peer-review

Abstract

We estimate market power in California's surface water market. Market power may distort the potential welfare gains from water marketing. We use a Nash-Cournot model and derive a closed-form solution for the extent of market power in a water market setting. We then use this solution to estimate market power in a newly assembled dataset on California's water economy. We show that, under the assumptions of the Nash-Cournot model, market power in this thin market is limited.

Original language	English
Pages (from-to)	1274-1299
Number of pages	25
Journal	American Journal of Agricultural Economics
Volume	106
Issue number	3
Early online date	28 Oct 2023
DOIs	https://doi.org/10.1111/ajae.12434
Publication status	Published - May 2024

Funding

We thank seminar participants at various conferences as well as the anonymous referees for comments on earlier versions of this paper. We thank Clay Landry and WestWater Research, LLC for sharing the Californian water transaction data used in this paper. Françeska acknowledges financial support from the Ministerio de Ciencia, Innovación y Universidades and the European Union under grants (ECO2016‐75410‐P, BES‐2017‐080192, and PID2019‐105982GB‐I00/AEI/10.13039/501100011033), and from the UniversitatRoviraiVirgili and the Generalitat de Catalunya under grant (2019PFR‐URV‐53).

Funders	Funder number
UniversitatRoviraiVirgili
Ministerio de Ciencia, Innovación y Universidades
European Commission	ECO2016‐75410‐P, BES‐2017‐080192, PID2019‐105982GB‐I00/AEI/10.13039/501100011033
Generalitat de Catalunya	2019PFR‐URV‐53

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abstract = "We estimate market power in California's surface water market. Market power may distort the potential welfare gains from water marketing. We use a Nash-Cournot model and derive a closed-form solution for the extent of market power in a water market setting. We then use this solution to estimate market power in a newly assembled dataset on California's water economy. We show that, under the assumptions of the Nash-Cournot model, market power in this thin market is limited.",

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Market power in California's water market

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