Research – WestWater Research

Data-Driven Research

Partnering with Leading Institutions to Advance Water Market Science

At WestWater, we support rigorous peer-reviewed research. That’s why we collaborate with research institutions, from federal agencies to leading universities, to answer the water sector’s most pressing questions. Our partnerships are powered by Waterlitix^TM, our proprietary platform and the industry’s most comprehensive source for water rights and infrastructure transaction data.

We’ve supported research institutions, contributing to many peer-reviewed publications, theses, and dissertations. Our data has informed studies across the research spectrum, from understanding the societal impacts of water markets to quantifying the economic value of water itself.

Research Partners:

Arizona State University

Caltech

Crawford School of Public Policy

Duke University

MIT

Montana State University

National University of Singapore

Oregon State University

Penn State University

Stanford University

UC Davis

UC San Diego

UC Santa Barbara

University of Alberta

University of Wyoming

USDA Economic Research Service

Waterlitix™ Research

This ERS report presents a targeted review of the economics literature on the value of water for agriculture and environmental flows, drawing on both revealed-behavior and survey-based valuation methods. It examines the tradeoffs involved in water use and allocation under competing demands and limited availability. The report also identifies the central challenges in measuring water's economic value, including the complexity of the systems involved, heterogeneity in preferences and behaviors, and uncertainty in water availability, and notes that market prices often fail to fully reflect value across sectors, particularly for environmental flows.

This paper studies transaction costs in California's wholesale surface water market and estimates the benefits of reducing them, decomposing observed prices into demand and transaction costs and then simulating a market with only physical frictions. Transaction costs are found to be large: median variable costs equal 54% of the transaction price, and fixed costs deter many districts from participating at all. Eliminating them would produce gains of several hundred million dollars per year, or roughly 1% to 3% of statewide water expenditures, with gains disproportionately large in dry years. The analysis relies on a proprietary dataset of California water transactions from 1990 to 2015 compiled by WestWater Research.

This paper estimates market power in California's surface water market, where trading is dominated by a small number of very large water districts and market power could distort the welfare gains from water marketing. The authors use a Nash-Cournot model, derive a closed-form solution for the extent of market power in a water market setting, and apply it to a newly assembled dataset on California's water economy. Under the model's assumptions, market power in this thin market is found to be limited.

This study updates the analysis of western water markets using more than 7,000 transactions across thirteen river basins in eight states between 2002 and 2019. The authors develop a model that provides a measurement of water scarcity in the West. Reported results indicate water right prices over the study period increased at a rate similar to the general price level.

This three-chapter dissertation examines inefficiencies in natural resource use, with the water market analysis in Chapter 2. That chapter pairs daily administrative records of prior appropriation water allocations with remotely sensed irrigated crop outcomes to test whether water is allocated efficiently in Colorado's agricultural sector, and rejects the hypothesis of allocative efficiency, finding evidence of unrealized gains from trade. The author attributes the result to transfer frictions and the perverse incentives created by beneficial use and no-injury requirements. The remaining chapters address climate adaptation in global fisheries and the economic value of reservoir storage.

An international comparison of water markets, water policy and regulation, and competition for water resources.

This thesis applies a hedonic price model to 2,274 agricultural parcels in Deschutes County, using assessor-determined real market values in place of actual land sales. A log-linear specification produced values ranging from $116.80 to $234.67 per acre-foot, with the most statistically significant result at $234.67, and two alternative valuation approaches reinforced a capitalized value near $200 per acre-foot. The thesis also demonstrates that using a binary indicator for the presence of a water right rather than a continuous coverage variable may produce inaccurate results, and that SSURGO crop productivity data can substitute where traditional soil quality data are incomplete.

This master's project examines growth and trends in environmental water market activity across the western United States from 2008 to 2018, finding expansion in both volume and market value alongside uneven treatment under state law. Three factors drove that expansion: regulatory requirements, with 84% of transfers tied to a federal or state program; market maturation through new payment types and conservation tools; and NGO purchasing power exceeding that of federal or state agencies. The report closes by identifying future growth opportunities including reduced transaction costs, open exchanges, and greater private investment.

This companion study models how specific changes to Colorado water law would affect transaction costs. The authors find some legal changes would reduce costs while producing less probable increases in third-party effects, and others would not. The central conclusion is that reforming water law to lower transaction costs involves a trade-off between those savings and the potential for greater third-party impacts.

This paper examines how transaction costs act as a barrier to expanded water marketing under western water rights law, using Colorado as the case study. The authors find that transaction cost uncertainty depends on the legal procedures governing transfers, and that costs are higher in water-scarce regions, for higher-conflict transfers, and for senior water rights, while showing scale economies. They also find costs have grown over time as competition for scarce water has intensified and water rights operations have become more complex.

This review examines the role water markets play in addressing scarcity in Arizona, California, and Texas, tracking supply by source, demand by sector, and trading activity by volume and value from 2009 to 2018. The authors report that trades represent roughly 4% of annual consumptive use in Arizona and closer to 2% in California and Texas, that leases dominate over permanent sales, and that agriculture supplied about 73% of traded volume across the western states while municipalities were the largest buyer at 46%. The paper concludes that hardening demand and more variable supplies point to an expanding role for markets, provided transaction costs, transparency, and information flows improve. Market data are drawn from Waterlitix, described in the paper as the largest and most comprehensive source of water rights price and sales information in the United States.

A perspective on water rights trading activity in the Western US, including regulations and policies, market drivers, and observed pricing trends. Case studies are presented for Arizona, California, and Colorado.

This article presents a history on the development and operation of a Tribal Water Bank operated by the Shoshone-Bannock Tribes in Idaho. The Tribal Water Bank has consistently provided lease water supplies to instream flows, hydropower, and agriculture, while also providing an important source of revenue to support Tribal water management activities. The Tribal Water Bank story is then extrapolated to broader Tribal water marketing across the Western U.S.

This study applies econometric analysis to estimate the implicit values market participants assign to the attributes of ditch company water rights shares in Colorado's South Platte River Basin. Buyers were found to value proximity of the point of diversion, reliability of water deliveries, and temporal flexibility of use. Methodologically, the paper introduces the coefficient of variation as a single measure of supply reliability for shares that represent a portfolio of rights with differing appropriation dates, and it is the first water market price study to test and correct for spatial autocorrelation.

A general overview of water market activity and drivers of such activity in the Western U.S.

This is the peer-reviewed publication of the 2010 NBER integrated assessment. It presents the same framework, organized around institutional foundations, economic efficiency, and environmental sustainability, and applies it to five markets: Australia’s Murray-Darling Basin, the western United States, Chile, South Africa, and northern China. The comparative findings are used to draw general conclusions about how water governance can be improved.

This paper compares two regions that share climate variability, historical over-allocation to irrigators, and rising competition among agricultural, urban, and environmental uses. Drawing on 4,168 western U.S. transactions from 1987 to 2008, the authors find water rights are more clearly defined and trading more common in Australia, and suggest longer periods of scarcity and higher water values explain the gap. The paper concludes that gross gains from trade in both markets run into the billions annually but remain constrained by incomplete property rights, over-allocation, and restrictions on transfer. Colorado price data reported in the paper are attributed to WestWater Research.

This working paper develops a framework for assessing water markets against the three pillars of integrated water resource management: economic efficiency, equity, and environmental sustainability. The framework is built to benchmark markets against one another, track performance over time, and identify adjustments available to policymakers. It is then applied to Australia’s Murray-Darling Basin, Chile’s Limarí Valley, northern China, South Africa, and the western United States to identify where each market contributes to sound water management and where its performance requires further development.

This article dives into the role and importance of Tribal water markets, both for Native American Tribes and for the regional water systems. As water supplies become fully appropriated, Tribal reserved water rights represent one of the last big blocks of potential water supply for regional economies.

A brief article on the importance, emergence, and growth of water markets in the Western U.S. This article points out the rising importance and role of water markets in a water constrained region of the U.S.

Justin Bowen

Waterlitix Associate

Brett Bovee

Intermountain Regional Director

To learn more about our research partnerships, contact Justin Bowen or Brett Bovee.