Markets for Water

Volume 15 of the series Natural Resource Management and Policy pp 77-94

Negotiated Transactions as Conflict Resolution Mechanisms: Water Bargaining in the U.S. West

  • Bonnie G. ColbyAffiliated withDepartment of Agricultural and Resource Economics, The University of Arizona

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Disputes prompted by competition for scarce water supplies have proliferated worldwide, generating enormous costs and uncertainties for affected parties. Economists have extolled the virtues of markets and voluntary transactions for well over a century as a means to achieve efficient resource allocation. This chapter examines voluntary water transfers from a somewhat different perspective than that of allocative efficiency. It explores negotiated transactions as a tool for resolving water disputes through analysis of conflicts in the American West. The study of mechanisms to successfully resolve water disputes is a field of inquiry in its own right, one in which economics is just beginning to play a role (xcDinar and Loehman, 1995). Interesting challenges arise in applying economic paradigms to evaluate dispute resolution processes. Conflicts over water often are difficult to evaluate using economic efficiency constructs because the baseline entitlements from which costs and benefits should be measured are themselves the subject of contention. While allocative efficiency is problematic in such situations, other economic criteria can be used to compare the strengths and weaknesses of different approaches to resolving water disputes.