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  4. Option Contracting in the California Water Market
 
research article

Option Contracting in the California Water Market

Weber, Thomas A.  
•
Tomkins, Claire D.
2010
Journal of Regulatory Economics

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.

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Type
research article
DOI
10.1007/s11149-009-9107-2
Author(s)
Weber, Thomas A.  
Tomkins, Claire D.
Date Issued

2010

Publisher

Springer Verlag

Published in
Journal of Regulatory Economics
Volume

37

Issue

2

Start page

107

End page

141

Subjects

Bilateral contracting

•

Capacity-reservation contracts

•

Option pricing

•

Real options

•

Water resources

Editorial or Peer reviewed

REVIEWED

Written at

EPFL

EPFL units
OES  
Available on Infoscience
July 15, 2013
Use this identifier to reference this record
https://infoscience.epfl.ch/handle/20.500.14299/93315
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