All-in-Auctions for water

This paper proposes a novel mechanism for reallocating temporary water flows or permanent water rights. The All-in-Auction (AiA) increases efficiency and social welfare by reallocating water without harming water rights holders. AiAs can be used to allocate variable or diminished flows among traditional or new uses. AiAs are appropriate for use within larger organizations that distribute water among members, e.g., irrigation districts or wholesale water agencies. Members would decide when and how to use AiAs, i.e., when transaction costs are high, environmental constraints are binding, or allocation to outsiders is desired. Experimental sessions show that an AiA reallocates more units with no less efficiency that traditional two-sided auctions.

► Water demands are increasing (affluence and population growth). ► Water supplies are falling (climate change and environmental set-asides). ► Increasing scarcity makes reallocation socially desirable. ► Valuable existing property rights need to be respected. ► All-in-Auctions reallocate at low cost while protecting relevant rights.