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Managing a duopolistic water market with confirmed proposals. An experiment

García-Gallego, A., Georgantzis, N., Hernán-González, R. and Kujal, P. (2012) Managing a duopolistic water market with confirmed proposals. An experiment. Revista Internacional de Sociologia, 70 (Extra_1). pp. 189-213. ISSN 0034-9712

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To link to this item DOI: 10.3989/ris.2011.09.20

Abstract/Summary

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.

Item Type:Article
Refereed:Yes
Divisions:Faculty of Life Sciences > School of Agriculture, Policy and Development > Economic and Social Sciences Division > Food Economics and Marketing (FEM)
ID Code:34817
Publisher:CSIC

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