research article
Option Contracting in the California Water Market
Temporary water transfers, as achievable under option contracts, capture gains from trade that would go unrealized if only permanent transfers of water rights were possible. This paper develops a bilateral option contracting model for water which includes the possibility of conveyance losses and random delivery. Seller-optimal and socially optimal option contracts are characterized in terms of relevant base and strike prices, as well as contract volumes, from an ex-ante and an ex-post point of view. Lastly, welfare gains are estimated, and actual contract prices in California are compared to model-predicted prices.
Type
research article
Author(s)
Tomkins, Claire D.
Date Issued
2010
Publisher
Published in
Volume
37
Issue
2
Start page
107
End page
141
Editorial or Peer reviewed
REVIEWED
Written at
EPFL
EPFL units
Available on Infoscience
July 15, 2013
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