A Water Bank Game with Fishy Externalities

Abstract

This article describes a classroom game used in a minicourse on economics for Environmental Studies students. The game, inspired by the operation of the Idaho Water Bank and the rising importance of water rights trades in the region, features a double oral auction in which farmers sell diversion rights and hydroelectric companies buy them. The increased in-stream flows create external benefits for fly fishers, who participate in the game in later rounds. The game can illustrate the role of markets in allocating resource use rights, and the effects of external benefits, free riding, and price ceilings.