Please use this identifier to cite or link to this item:
https://hdl.handle.net/2440/100650
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Type: | Journal article |
Title: | Understanding irrigator bidding behavior in Australian water markets in response to uncertainty |
Author: | Zuo, A. Brooks, R. Wheeler, S. Harris, E. Bjornlund, H. |
Citation: | Water: an open access journal, 2014; 6(11):3457-3477 |
Publisher: | MDPI AG |
Issue Date: | 2014 |
ISSN: | 2073-4441 |
Statement of Responsibility: | Alec Zuo, Robert Brooks, Sarah Ann Wheeler, Edwyna Harris, and Henning Bjornlund |
Abstract: | Water markets have been used by Australian irrigators as a way to reduce risk and uncertainty in times of low water allocations and rainfall. However, little is known about how irrigators’ bidding trading behavior in water markets compares to other markets, nor is it known what role uncertainty and a lack of water in a variable and changing climate plays in influencing behavior. This paper studies irrigator behavior in Victorian water markets over a decade (a time period that included a severe drought). In particular, it studies the evidence for price clustering (when water bids/offers end mostly around particular numbers), a common phenomenon present in other established markets. We found that clustering in bid/offer prices in Victorian water allocation markets was influenced by uncertainty and strategic behavior. Water traders evaluate the costs and benefits of clustering and act according to their risk aversion levels. Water market buyer clustering behavior was mostly explained by increased market uncertainty (in particular, hotter and drier conditions), while seller-clustering behavior is mostly explained by strategic behavioral factors which evaluate the costs and benefits of clustering. |
Keywords: | water allocation market; price clustering; uncertainty; strategic behavior |
Rights: | © 2014 by the authors; licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution license (http://creativecommons.org/licenses/by/4.0/). |
DOI: | 10.3390/w6113457 |
Grant ID: | http://purl.org/au-research/grants/arc/DP140103946 |
Published version: | http://dx.doi.org/10.3390/w6113457 |
Appears in Collections: | Aurora harvest 7 Global Food Studies publications |
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hdl_100650.pdf | Published version | 391.52 kB | Adobe PDF | View/Open |
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