Rural–urban water transfers with applications to the US–Mexico border region

This chapter examines large-scale rural-urban water transfers between irrigation districts and municipal providers as a bargaining game, drawing on empirical examples from the US-Mexico border region. While irrigation technology subsidy programs have been instituted to facilitate transfers and conserve water, increased irrigation efficiency can have unintended effects that actually discourage transfers and conservation. Numerical simulations of the bargaining game, based on the largest rural-urban water transfer agreement in US history, illustrate the usefulness of a game-theoretic approach to assessing transfers. While the transfer agreement provides significant benefits to contracting parties, policy questions concerning negative externalities of transfers remain unresolved.