Interactions between economic policies and institutions in water allocation and use: Theory and evidence from a Philippine watershed

This chapter begins by presenting such a highly simplified model (section 1) wherein what is distinguished are only the decisions of two agents, in upstream and downstream locations, who compete for a limited supply of surface water in each period. There is no attempt to provide a complete accounting for the complexities of such situations; rather, the ways that bring the role of economic incentives into sharp focus are simplified. In particular, market and non-market allocations of water are compared. Non-market allocations are further subdivided into those arising from a complete absence of property rights and those due to the assertion of rights by the state.