The Park Place Economist


This study examines the potential for a water leasing market within one singular basin in Southwestern, New Mexico. The goal of this research is to test the feasibility of a water market in the river basin and determine if price differentials are found in a prior appropriations setting. This was done through a laboratory experiment to test if participants would simulate an effective water leasing market in a basin within New Mexico. In order to assess the potential for a water leasing market, a water leasing market was designed to incorporate the hydrologic, engineering, institutional, and economic market of the Upper Mimbres Basin (Broadbent et. al., 2009). Using experimental economics, which uses computer programs and simulation to test an economic theory, the market value of water was induced through the set up of the experiment. The set up involved double auction where all bids and offers are presented publically and each bid and offer is presented simultaneously. The advantages of conducting a laboratory experiment is predominantly time, data that would usually take a year to collect can be done in a short amount of time. By simulating the water leasing market we can test participants’ reactions to drought conditions, which could take years to occur in the real setting of New Mexico.