Tomori, Françeska Ansink, Erik Houba, Harold Hagerty, Nick Bos, Charles
Year of Publication:
Tinbergen Institute Discussion Paper No. TI 2021-011/VIII
We estimate market power in California's thin water market. Market frictions 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 typical 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 Cournot model, market power in this thin market is limited.
Water markets Market power California Cournot-Nash