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Appropriative Water Rights and the Efficient Allocation of Resources

Burness, H. Stuart and Quirk, James P. (1978) Appropriative Water Rights and the Efficient Allocation of Resources. Social Science Working Paper, 157. California Institute of Technology , Pasadena, CA. (Unpublished)

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This paper investigates the allocative efficiency of the appropriative system of water rights, within the-context of a simplified model of a water using industry. At a long run competitive equilibrium for the industry and with a prohibition on the transfer of water rights among firms, it is shown that: (1) senior appropriators claim and use more water than junior appropriators; (2) senior appropriators bear less risk than junior appropriators; (3) the allocation of water and diversion capacitie-6among firms is inefficient, being dominated by an equal sharing among firms. The equal sharing allocation, which is Pareto optimal when diversion capacities are supplied by a competitive leasing industry, can be achieved under the appropriative system if there are competitive markets in water rights and in leases for the use of diversion capacities, an application of the Coase theorem.

Item Type:Report or Paper (Working Paper)
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Additional Information:Revised. Originally dated to April 1977. This research was conducted at the Environmental Quality Laboratory at Caltech and was supported in part under a grant from the Energy Research and Development Administration, No. EX-76-G-03-1305, Caltech Energy Research Program. Published as Burness, H. Stuart, and James P. Quirk. "Appropriative water rights and the efficient allocation of resources." The American Economic Review 69.1 (1979): 25-37.
Group:Social Science Working Papers
Funding AgencyGrant Number
Energy Research and Development Administration (ERDA)EX-76-G-03-1305
Caltech Energy Research ProgramUNSPECIFIED
Subject Keywords:Water rights, Water consumption, Waterways, Long run profit maximization, Leases, Marginal costs, Water use efficiency, River water, Stream flow, Allocative efficiency
Series Name:Social Science Working Paper
Issue or Number:157
Record Number:CaltechAUTHORS:20171025-153155841
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:82679
Deposited By: Jacquelyn Bussone
Deposited On:25 Oct 2017 23:14
Last Modified:03 Oct 2019 18:57

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