Water Agencies\u27 Distribution and Inefficiency Under Different Decision Rules

Water management organizations often distribute water among members according to a political decision function (e.g., voting, historical delivery, etc.) -- not economic functions of willingness to pay or shadow values. As a result, scarce water supplies are lost to some members and found by others, leading to, respectively, over-conservation or over-use of water by the members. We find analytical equilibria with a two-player, game-theoretic model of optimal water distribution under economic (base case) and different political allocation rules (historic allocation, land-values, population, agricultural intensity) to measure the theoretical distortion of each allocation compared to the base case. We then simulate model with n-players to examine the effects of heterogeneous types and interactive influences with different parameter values. We compare these results to the actual allocation of water between the 26 members of the Metropolitan Water District of Southern California to estimate the distribution of costs and benefits to MWD members under MWD\u27s political allocation mechanism