Leo K. Simon

On the Implementation and Performance of Water Rights Buyback Schemes

Governments are increasingly reliant on the reacquisition of water rights as a mechanism for recovering overexploited basins. Yet, serious concerns have recently been raised about the efficacy and operational dimensions of existing programs. Water buyback is typically implemented as the purchase of a fixed quantity of water rights from the agricultural sector at the price set by the Water Authority. This paper seeks to analyze whether the use of water buyback in its current form represents a sensible means of recovering overexploited basins. The results—which are particularly relevant to contexts characterised by poor enforcement regimes and widespread illegal water use—highlight the need for greater scrutiny of current programs and call for additional work to improve the design of reacquisition policies in the context of water resource management.

Property Rights and Water Transfers: Bargaining Among Multiple Stakeholders ∗

Both developing and developed countries constantly face problems related to ill-defined property rights in common-pool resource systems. These problems are especially acute in water resource ecosystems. Anatural consequence of incomplete property rights is the substitution of market-determined exchange by negotiation-determined exchange. Water rights in the western region of the United States provide an excellent example. This paper is a case study of the negotiations over a water transfer from Californias Imperial Valley to San Diego County in light of the transfers impact on the inland Salton Sea. We analyze these negotiations as a multi-issue, multi-party, non-cooperative negotiating game. We construct stylized representations of the payoff functions for each party as well as of the physical, economic, and political constraints. To model the default outcome, we assign probabilities to various contingencies that might have arisen had the parties been unable to negotiate an agreement. We calibrate the model to the final agreement and then focus on the impact on the negotiated outcome of certain features of the institutional landscape: the influence of the allocation and specification of property rights; what would have happened if a producer group had negotiated directly with the urban stakeholder; the role of certain critical features of the Law of the River; and the impact of environmental regulations.

Nash bargaining and risk aversion

It is widely accepted among axiomatic bargaining theorists that if one bargainer is more risk averse than a second, the second will be a tougher bargaining opponent than the first against all opponents. We argue that this relationship between risk aversion and bargaining toughness is both highly fragile, and more nuanced than previously articulated. In the Nash and Kalai–Smorodinsky bargaining frameworks, we establish that when a bargainer is compared with a second who is “almost globally” more risk averse than the first, the supposedly immutable relationship between bargaining effectiveness and risk aversion evaporates. Specifically, we identify an upper-hemicontinuity failure of a correspondence which maps the power set of all lotteries to those utility pairs that satisfy our “almost global” comparative risk aversion relation on these subsets. We trace the consensus view that tougher bargainers are less risk-averse to an exclusive focus on precisely the point at which this correspondence implodes.