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27 Nat. Resources J. 617 (1987)
Do Water Market Prices Appropriately Measure Water Values

handle is hein.journals/narj27 and id is 635 raw text is: BONNIE COLBY SALIBA,* DAVID B. BUSH,** WILLIAM E. MARTIN,*** and THOMAS C. BROWN**** Do Water Market Prices Appropriately Measure Water Values? ABSTRACT Valuation of changes in water availability is an important issue in the western United States. Agriculture, industry, and expanding urban centers are exerting increasing pressure on limited water resources. Federal, state and local agencies are exploring and im- plementing a variety of water supply augmentation strategies in the western states, raising questions regarding the value of potential increments or decrements in water supply. Pressures for water trans- fers exist as water in many regions is fully appropriated and new and expanding uses can be accommodated only through transfer from established uses. In some areas, water is routinely transferred through private market exchanges. In other areas, institutions which govern water allocation slowly are being modified to facilitate market transfer of water rights. This research examines selected water mar- kets in the western United States, observing water prices over time and evaluating the appropriateness of market prices as measures of the economic value of incremental changes in regional water supply. Market characteristics which may distort prices as indicators of water values include imperfect competition, third party effects, un- certainty, and equity considerations. Western water markets exhibit these characteristics to varying degrees. Nonmarket valuation tech- niques are useful in supplementing price information generated by market transactions. Reliance on both market and nonmarket value information can help improve valuation of incremental increases in water supplies and assist in better policy decisions regarding supply augmentation proposals. INTRODUCTION Valuing incremental changes in water availability is an important task in the western United States as agriculture, industry and population growth exert increasing pressure on limited water resources. Federal, state and local agencies have an active interest in regional supply augmentation *Assistant Professor, University of Arizona, Tucson **Research Specialist, University of Arizona, Tucson ***Professor, University of Arizona, Tucson ****Economist, U.S. Forest Service Rocky Mountain Experiment Station

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