Abstract
AbstractWe estimate market power in California's surface water market. Market power may distort the potential welfare gains from water marketing. We use a Nash‐Cournot model and derive a closed‐form solution for the extent of market power in a water market setting. We then use this solution to estimate market power in a newly assembled dataset on California's water economy. We show that, under the assumptions of the Nash‐Cournot model, market power in this thin market is limited.
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