Abstract
Water transfer markets, in theory, provide a pareto-optimal solution to increasing water scarcity. The experience of municipal water purchasers, however, does not appear to square with theory. Indeed, municipal purchasers facing water supply shortfalls often pay comparatively exorbitant premiums for marginal units of water; this evidenced prices-paid differential is likely imputable to allocative inefficiency in water transfer markets—i.e., prices paid by municipal water purchasers are distorted above the marginal cost of supplying the water. Broadly, the hypothesized allocative inefficiency is a market failure in-and-of-itself, calling into question normative arguments that water transfer markets provide for an ideal mode of resource allocation. This paper highlights and appraises various factors likely contributing to the hypothesized allocative inefficiency in water transfer markets—their existence rendering the hypothesis here at least plausible in praxis.
First Page
21
Custom Citation
Robert Putka, Dammed Water Markets: How Western Water Transfer Markets may be Inhibiting an Efficient Allocation of Water, 29 U. Denv. Water L. Rev. 21 (2026).