Hostname: page-component-78c5997874-94fs2 Total loading time: 0 Render date: 2024-11-08T17:32:14.920Z Has data issue: false hasContentIssue false
  • English
  • Français

Right-to-Choose Auctions: A Field Study of Water Markets in the Limari Valley of Chile

Published online by Cambridge University Press:  15 September 2016

Jonathan E. Alevy ,
Oscar Cristi  and
Oscar Melo
Jonathan E. Alevy
Affiliation:
Department of Economics at the University of Alaska in Anchorage, Alaska
Oscar Cristi
Affiliation:
Fellow at Centro de Investigación en Empresas y Negocios (CIEN) at the Universidad del Desarrollo in Santiago, Chile
Oscar Melo
Affiliation:
Department of Agricultural Economics at Pontificia Universidad Catolica de Chile in Santiago, Chile
Get access

Abstract

Field experiments were conducted with farmers in the Limari Valley of Chile to test extant theory on right-to-choose auctions. Water volumes that differed by reservoir source and time of availability were offered for sale by the research team. The auctions were supplemented by protocols to elicit risk and time preferences of bidders. We find that the right-to-choose auctions raise significantly more revenue than the benchmark sequential auction. Risk attitudes explain a substantial amount of the difference in bidding between auction institutions, consonant with received theory. The auction bidding revealed distinct preferences for water types, which has implications for market re-design.

Keywords

water marketfield experimentauction design
Type
Contributed Papers
Information
Agricultural and Resource Economics Review , Volume 39 , Issue 2 , April 2010 , pp. 213 - 226
Copyright
Copyright © 2010 Northeastern Agricultural and Resource Economics Association 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Alevy, J.E., and Price, M.K. 2009. “A Field Study of Right-to-Choose Auctions.” Unpublished manuscript available from authors, Department of Economics, University of Alaska, Anchorage, AK.Google Scholar
Andersen, S., Harrison, G.W., Lau, M.I., and Rutström, E.E. 2008. “Eliciting Risk and Time Preferences.” Econometrica 76(3): 583–618.CrossRefGoogle Scholar
Ashenfelter, O., and Genesove, D. 1992. “Testing for Price Anomalies in Real-Estate Auctions.” American Economic Review 82(2): 501–505.Google Scholar
Burguet, R. 1999. “Right to Choose in Oral Auctions.” Working Paper No. 439.99, Institut d’Anàlisi Econòmica, Bellaterra, Spain.Google Scholar
Burguet, R. 2007. “Right to Choose in Oral Auctions.” Economics Letters 95(2): 167–173.CrossRefGoogle Scholar
Cristi, O. 2007. “The Influence of Heterogeneous Risk Preferences on Water Market Activity: An Application to the Paloma System of the Limari Water Basin, Chile.” Doctoral dissertation, Department of Agriculture and Resource Economics, University of Maryland, College Park, MD.Google Scholar
Dickinson, D.L., and Bailey, D. 2002. “Meat Traceability: Are U.S. Consumers Willing to Pay for It?” Journal of Agricultural and Resource Economics 27(2): 348–364.Google Scholar
Eliaz, K., Offerman, T., and Schotter, A. 2008. “Creating Competition Out of Thin Air: An Experimental Study of Rightto-Choose Auctions.” Games and Economic Behavior 62(2): 383–416.CrossRefGoogle Scholar
Goeree, J.K., Plott, C.R., and Wooders, J. 2004. “Bidders’ Choice Auctions: Raising Revenues Through the Right to Choose.” Journal of the European Economic Association 2(2/3): 504–515.CrossRefGoogle Scholar
Hadjigeorgalis, E. 2000. “Private Water Markets in Agriculture and the Effects of Risk, Uncertainty, and Institutional Constraints.” Doctoral dissertation, Department of Agriculture and Resource and Economics, University of California, Davis, CA.Google Scholar
Hadjigeorgalis, E. 2004. “Trading Under Risk and Uncertainty in an Agricultural Water Market in Chile.” Cuadernos de Economía 41(122): 3–34.Google Scholar
Harrison, G.W., Harstad, R.M., and Rutström, E.E. 2004. “Experimental Methods and Elicitation of Values.” Experimental Economics 7(2): 123–140.CrossRefGoogle Scholar
Harrison, G.W., Lau, M.I., and Rutström, E.E. 2007. “Estimating Risk Attitudes in Denmark: A Field Experiment.” Scandinavian Journal of Economics 109(2): 341–368.CrossRefGoogle Scholar
Harrison, G.W., and List, J.A. 2004. “Field Experiments.” Journal of Economic Literature 42(4): 1009–1055.CrossRefGoogle Scholar
Harrison, G.W., and Rutström, E.E. 2008. “Risk Aversion in the Laboratory.” In Cox, J.C. and Harrison, G.W., eds., Risk Aversion in Experiments. Bingley, UK: Emerald.Google Scholar
Hearne, R., and Easter, K.W. 1995. “Water Allocation and Water Markets: An Analysis of Gains-from-Trade in Chile.” World Bank Technical Paper No. 315, World Bank, Washington, D.C.Google Scholar
Holt, C., and Laury, S. 2002. “Risk Aversion and Incentive Effects.” American Economic Review 92(5): 1644–1655.CrossRefGoogle Scholar
Howitt, R.E. 1998. “Initiating Spot Prices, Option Prices, and Water Markets: An Analysis of Emerging Markets in California.” In Easter, K.W., Rosegrant, M.W., and Dinar, A., eds., Markets for Water: Potential and Performance. Norwell, MA: Kluwer Academic Publishers.Google Scholar
List, J.A. 2006. “Field Experiments: A Bridge Between the Lab and Naturally Occurring Data.” Advances in Economic Analysis and Policy 6(2): article 8. Available online at http://www.bepress.com/bejeap/advances/vo16/iss2/art8/ (accessed March 9, 2010).Google Scholar
Lusk, J.L., Daniel, M.S., Mark, D.R., and Lusk, C.L. 2001. “Alternative Calibration and Auction Institutions for Predicting Consumer Willingness to Pay for Nongenetically Modified Corn Chips.” Journal of Agricultural and Resource Economics 26(1): 40–57.Google Scholar
Lusk, J.L., Fields, D., and Prevatt, W. 2008. “An Incentive Compatible Conjoint Ranking Mechanism.” American Journal of Agricultural Economics 90(2): 487–498.CrossRefGoogle Scholar
Murphy, J.J., Dinar, A., Howitt, R.E., Rassenti, S.J., and Smith, V.L. 2000. “The Design of ‘Smart’ Water Market Institutions Using Laboratory Experiments.” Environmental and Resource Economics 17(4): 375–394.CrossRefGoogle Scholar
Noussair, C., Robin, W., and Ruffieux, B. 2004. “Do Consumers Really Refuse to Buy Genetically Modified Food?” Economic Journal 114(492): 102–120.CrossRefGoogle Scholar
Palma, D. 2009. “Comercialización de los derechos de aprovechamiento de agua en la Cuenca del Limarí, Región de Coquimbo.” Unpublished thesis, School of Sciences, Agriculture Department, Universidad de La Serena, La Serena, Chile.Google Scholar
Roth, A.E. 1995. “Introduction to Experimental Economics.” In Kagel, J. and Roth, A.E., eds., Handbook of Experimental Economics. Princeton, NJ: Princeton University Press.Google Scholar
Rutström, E.E. 1998. “Home-Grown Values and Incentive Compatible Auction Design.” International Journal of Game Theory 27(3): 427–441.Google Scholar
Woolridge, J.M. 2001. Econometric Analysis of Cross Section and Panel Data. Cambridge, MA: MIT Press.Google Scholar
Zegarra, E. 2002. “Water Market and Coordination Failures: The Case of the Limarí Valley in Chile.” Doctoral dissertation, Department of Agricultural and Applied Economics, University of Wisconsin, Madison, WI.Google Scholar