Environmental Public Goods > Allocating river water

Answer

  1. Intermediate step: MSBs = 1000 - 2*Qs. Efficient allocation: Qs=300, Qd=900. W2Pd=MSBs=400.
  2. Intermediate step: W2Pd=0, Qd=1100. CS gain to in drinking water = 40,000; CS loss in stream water = 120,000; net loss = 80,000.
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Peter J Wilcoxen, The Maxwell School, Syracuse University
 Revised 05/10/2006