I present the economic principles of water allocation and pricing in a schematic water economy representing a wide range of real-world situations. The water policy has inter- and intratemporal components. The former determines extractions from the naturally replenished sources, given the...

The design of effective market institutions for allocation of water among competing uses remains an economic challenge both at a theoretical and practical level. The public good characteristic of instream flows adds another layer of externality which complicates transfers between consumptive and...