Application of Mechanism Design and Matching Theory to Water Market Design: An Institutional Approach

Document Type : Original Article

Author

Department of Economics, Faculty of Humanities, University of Ayatollah Ozma Borujerdi

Abstract

In order to estimate the demand and supply functions of water, this study has used system of simultaneous equations for the period 2001-2012. Hence, real and nominal marginal price of the industry and mining demand was estimated 6532.45 and 12072.2 Rials. Also based on agricultural water demand real and nominal marginal price was estimated 977.21 and 1698.442 Rials. The result of economic value of water in different sections relatively showed that real and nominal economic value of per m3 in residential sector are 4462.34 and 8430.3, in agricultural sector are 620.399 and 1099.813, in industrial and mining sector are 4110.54 and 7727.08, in recreational sector is 1146.38 and finally in environmental sector is 596.739 Rials. This study design a matching based on the long-run supply and aggregate demand equilibrium, marginal prices and economic water value in different sections with use of mechanism design and two sided matching theory. Mechanism based on Gale- Shapley or deferred acceptance algorithm was solved. 

Keywords

References

-  Ansink, E. & Houba, H. (2012). Market Power in Water Markets. Journal of Environmental Economics and Management, 64, 237–252.
-  Carey, J.M. & Sunding, D.L. (2001). Emerging Markets in Water: A Comparative Institutional Analysis of the Central Valley and the Colorado-Big Thompson Projects. Natural Resources Journal, 41, 283-328.
-  Chong, H. & and Sunding, D. (2006). Water Markets and Trading. The Journal of Annual Review of Environmental Resources, 31(11), 1-26.
-  Grafton, R.Q. & Horne, J. (2014). Water Markets in the Murray-Darling Basin. Agricultural Water Management, 145, 61–71.
-  Griffin, R.C., (2006). Water Resource Economics: The Analysis of Scarcity, Policies, and Projects. MIT Press.
-  Howe, C.W. & Goodman, D.J. (1995). Resolving Water Transfer Conflicts Through Changes in Water Market Process. in A. Dinar and E.T. Loehman (Eds.), Water Quantity/Quality Management and Conflict Resolution: Institutions, Processes and Economic Analysis, Preager, Westport, Connecticut, 119-129.
-  Jafari, S.A. (2003). Water Market Approach and Its Requirements. Journal of Agriculture Economy, 12(48), 75-103 (In Persian).
-  Jalili Kamju, S.P. (2015). Stable Allocation and Practice of Water Market Design (The Case Study: Zayanderud River Basin). University of Isfahan, Faculty of of Administrative Sciences and Economic, Ph.D. Thesis (In Persian).
-  Jalili Kamju, S.P. (2016). Choice Experiment – Conditional Logit: A New Approach in Estimate of Visitor’s WTP with Zayanderood Ecosystem Services. Journal of Environmental Research, forthcoming (In Persian).
-  Jalili Kamju, S.P. & Khoshakhlagh, R. (2016). Using the Game Theory in Optimal Allocation of Water in Zayandehrud. Journal of Iran Applied Economics, 5(18), 53-80 (In Persian).
-  Jalili Kamju, S.P., Khoshakhlagh, R., Fotros. M.H. & Derakhshan, M. (2013). Regional and Non-regional Visitor’s Preferences Estimation for Zayanderood Ecosystem’s Services: Choice Modeling. Journal of Energy Economic, 11(42), 1-24 (In Persian).
-  jalili kamju, S.P., Khoshakhlagh, R., Samadi, S. & Kiani, G. (2014). Estimation of Economic and Protection Value of Gavkhony Wetland Ecosystem Characteristics: Choice Experiment– Conditional Logit. Journal of Economic Research, 50(1), 99-127 (In Persian).
-  Jefreh, M. & Alizade, S. (2008). Evaluate of Market Role in Optimal Allocation of Water. Journal of Economic Science, 2(8), 79-95 (In Persian).
-  Keramtzade, A. Vhizari, H. & Sharzie, G. (2010). Roe of Water Market at Evaluate of Agricultural Water Economic Value. Economic Research and Agricultural Development, 2(1), 29-44 (In Persian).
-  Khoshakhlagh, R. Sajadi. M., Rajabi, M. & Khashei, M. (2016). Evaluate of Aggregate Demand Water (Isfahan Case Study). Natural Economic Resources, 1(1), 1-19 (In Persian).
-  Landry C.J. (2001). How Water Markets Can End Conflicts: A Guide for Policy Markets. Political Economy Research Center.
-  McKinney, D.C., Cai, X., Rosegrant, M.W., Ringler, C. & Scott, C.A. (1999). Modeling Water Resources Management at the Basin Level, Review and Future Directions, International Water Management Institute, Colombo, Sri Lanka.
-  Oczkowski, E. (2008). Excess Demand, Market Power and Price Adjustment in Clearinghouse Auction Markets for Water, Economic Analysis Policy, 38(2), 261-276.
-  Pigram, J., (1993). Property Rights and Water Markets in Aus-tralia: an Evolutionary Process Toward Institutional Reform. Water Resources Res., 29, 1313–1319.
-  Power Ministration. (2012). Update of Water General Project with Approach Continues Management of Water Resources (In Persian).
-  Roth, A.E. (1999). The NRMP as a Labor Market. The American Medical Association, 275, 1054-1056.
-  Roth, A.E. (2008). Deferred Acceptance Algorithms: History, Theory, Practice, and Open Questions. International Journal of Game Theory, 36(3), 537-569.
-  Roth, AE. (2012). The Theory and Practice of Market Design. Lecture Prize, Nobel Lecture, Working Paper.
-  Jalili Kamju, S.P, Khoshakhlagh, R., Shirinkhah, Y., Samadi, S. & Kiani, G.H. (2016). Application of Nested Logitech Model for Ecosystem Services Valuation (Case study: Gavkhony Wetland). Journal of Ecopersia Isfahan Province, 4(1), Page 1251-1267 (In Persian).
-  Wang, L., Fang, L. & Hipel, W. (2003). Water Resources Allocation: A Cooperative Game Theoretic Approach. Journal of Environmental Informatics, 2(2), 11-22.
Yousefi, A., Hasanzade, M. & Keramtzade, A. (2016). Evaluate the Welfare Effect of Water Marketable Allocation in Iran. Journal of Iran Water Resources Research, 10(1), 15-225 (In Persian).
Journal of Economics and Modelling
Volume 7, Issue 26 - Serial Number 26
September 2016
Pages 121-158

Files

Share

How to cite

Statistics