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Type: Journal article
Title: Measuring price elasticities of demand and supply of water entitlements based on stated and revealed preference data
Author: Zuo, A.
Wheeler, S.
Adamowicz, W.
Boxall, P.
Hatton-MacDonald, D.
Citation: American Journal of Agricultural Economics, 2015; 98(1):314-332
Publisher: Oxford University Press
Issue Date: 2015
ISSN: 0002-9092
Statement of
Alec Zuo, Sarah Ann Wheeler, W.L. (Vic) Adamowicz, Peter C. Boxall and Darla Hatton-MacDonald
Abstract: Estimates of price elasticities of water entitlements, known as permanent water or water rights in the United States, are complicated by data limitations and problems of endogeneity. To overcome these issues, we develop an approach to generate stated preference data and combine them with revealed preference data to estimate price elasticities from various types of water entitlement sales in the southern Murray-Darling Basin, Australia. Our results suggest that price elasticities of demand and supply of high security water entitlements are inelastic in the relevant market price range between AUD $1,700 to $2,100 per mega-liter, and that supply is relatively more inelastic than demand. For lower reliability water entitlements, the price elasticity of demand is estimated to be even more inelastic than high security water entitlements. The price elasticity of supply for general security water entitlements is similar to high security water entitlements, while the supply of low reliability water entitlements is extremely inelastic for our data set. The comparison between the stated and revealed preference data provides strong evidence of support for a data fusion approach, nevertheless, some differences in water sale preferences were found for irrigators choosing not to sell all of their water. The consistency of our results signals support for the use of this methodology in other water basins around the world.
Keywords: Contingent behavior; irrigation; price elasticity; water entitlements; water markets
Rights: © The Author 2015. Published by Oxford University Press on behalf of the Agricultural and Applied Economics Association. This is an Open Access article distributed under the terms of the Creative Commons Attribution- NonCommercial-NoDerivs licence (, which permits non- commercial reproduction and distribution of the work, in any medium, provided the original work is not altered or transformed in any way, and that the work is properly cited. For commercial re-use, please contact
RMID: 0030033673
DOI: 10.1093/ajae/aav022
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Appears in Collections:Global Food Studies publications

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