Trading Activity in an Informal Agricultural Water Market: An Example From California

In the American West, there is a well-known divergence between the spatial and temporal supply of surface water and the demand of agricultural and urban users for that water. In general, mountainous regions with high precipitation and winter snowfall tend to be sparsely populated or poorly suited to agriculture. Conversely, large agricultural and urban centers have often outgrown local water supplies. Water for agricultural, urban, and environmental uses is most needed during precisely those summer months when there is no precipitation. Historically, these concerns have been addressed through the construction of largescale public water storage and distribution projects (for general accounts, see Worster, 1985 or Reisner, 1986). However, in recent years, increasing environmental concerns and changes in the political climate have reduced the feasibility of further dam building in the American West. As a result, there has been an increase in emphasis on institutions and mechanisms that attempt to reallocate the limited available water supply amongst competing users (Vaux & Howitt, 1984, Howe et al., 1986).