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Water Leasing

Funding: SAHRA, USGS/SILPE, SNL

Participants: Craig Broadbent, David Brookshire, Don Coursey, Vince Tidwell, Marissa Reno

Rio Grande River (near Albuquerque, NM)This project integrates the natural/physical setting of a river system into a economic market structure to test if water leasing markets (short term reallocation of water rights) is economically and hydrologically feasible.  To accomplish this goal a system dynamics framework is employed to model the Rio Grande Basin between Cochiti and Elephant Butte Reservoirs in New Mexico.  Using the tools of experimental economics a market model is then coupled with this hydrologic model in five distinct stages.

  • Stage 1:  Stylized framework that allows us to address the feasibility of a water leasing market, testing if participants can handle the cognitive complexity of trading under different climatic scenarios.
  • Stage 2:  An extension of the Stylized framework to include cash crop and capital crop farmers.  The cash crop farmers were modeled to grow either hay or chili and could choose from 1-10 acres on one-acre intervals the amount of crop to be planted.  The coupled model now runs on a monthly time step rather then a yearly time step, with 6 months in each growing season.
  • Stage 3:  Extends the stage 2 model to examine the use of a futures market to allow participants to hedge against water uncertainty.  This model allows for futures trading within a growing season and across growing seasons using the different cash and capital crops developed for stage 2. 
  • Stage 4:  Medium Resolution Modeling to address the issue of third party impacts from trading within ditches and between ditches.  Using a finer scale hydrologic model for the section of the Rio Grande located around Albuquerque, NM water trading scenarios have been developed to discover if third party effects are present and the impact of these effects. 
  • Stage 5:  Mimbres Basin water leasing market.  This project is being developed in cooperation with the New Mexico Office of the State Engineer to create a real time leasing market for the basins users. 
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Copyright 2012