Incentive auctions for water rights

 Here's a press release from Auctionomics, the consulting firm run by Paul Milgrom and his business partner Silvia Console Battilana. They propose to repurpose water rights in a way that may resemble the recent incentive auctions for repurposing radio spectrum.

From Lawsuits to Solutions: Auctionomics Is Harnessing Efficient Market Design and Deep Tech for a Litigation-Free Solution to the Water Crisis by Auctionomics 

"Earlier this year, Paul co-hosted a conference at Stanford University attended by a group of economists, lawyers, and water experts. The group developed a proposal for a novel policy to fix the Colorado River crisis: the U.S. should redefine and buy back existing water rights, just as it did for misallocated rights to radio airwaves.

Auctionomics led the development of the FCC's Broadband Incentive Auction, converting TV licenses to new valuable uses. The current issues with water rights are similar to those of the radio spectrum, where existing rights holders with solid legal standing were hesitant to change the status quo, despite the clear misallocation of resources.

However, Auctionomics successfully addressed the problem with its innovative auction design, facilitating next-generation telecommunications and raising $19.8 billion while safeguarding existing broadcasters.

The Colorado River proposal aims to address deficiencies in the current water rights allocation system. The existing system hinders mutually beneficial trades between users and prohibits water banking - a means to enable farmers or cities manage current water use more efficiently, leaving more in reservoirs for future dry periods.

While there are historical reasons for these limitations - the uses of river water are diverse, interconnected, and poorly measured. Modifying them can result in severe consequences in a system that guarantees inefficiency and overconsumption. However, the same model employed to redistribute broadband spectrum can incentivize water rights holders to use their water more efficiently.

Auctionomics aims to adapt this model to the Colorado River with practical steps involving a hydrological survey, voluntary redefinition of water rights, and purchasing enough new rights from willing sellers to meet the necessary reductions in total consumption."