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Water 2014, 6(3), 723-744; doi:10.3390/w6030723
Article

Water Trading: Locational Water Rights, Economic Efficiency, and Third-Party Effect

1,* , 2
 and 3
Received: 9 November 2013; in revised form: 3 March 2014 / Accepted: 17 March 2014 / Published: 24 March 2014
(This article belongs to the Special Issue Water Policy, Productivity and Economic Efficiency)
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Abstract: Rivers flow downstream and unidirectionally. However, this fact has not yet been utilized in the institutional design for water trading. By utilizing this characteristic, we first designed a water trading system of “locational water rights.” This new system is able to mitigate the return flow-related and instream flow-related third-party effects of volumetric reliability from water transfers. We provided mathematical proof of its economic efficiency. We then applied this water trading system to the case of the Choushui River basin in Taiwan. In this area, agriculture is highly developed while domestic and industrial water demands have increased rapidly. Using an agent-based model simulation, we estimated the potential economic benefits of implementing the system of locational water rights in the Choushui River basin.
Keywords: water market; locational water right; economic efficiency; third-party effect; return flows water market; locational water right; economic efficiency; third-party effect; return flows
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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MDPI and ACS Style

Hung, M.-F.; Shaw, D.; Chie, B.-T. Water Trading: Locational Water Rights, Economic Efficiency, and Third-Party Effect. Water 2014, 6, 723-744.

AMA Style

Hung M-F, Shaw D, Chie B-T. Water Trading: Locational Water Rights, Economic Efficiency, and Third-Party Effect. Water. 2014; 6(3):723-744.

Chicago/Turabian Style

Hung, Ming-Feng; Shaw, Daigee; Chie, Bin-Tzong. 2014. "Water Trading: Locational Water Rights, Economic Efficiency, and Third-Party Effect." Water 6, no. 3: 723-744.


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