ABSTRACT
This chapter utilizes the theory of the anticommons to explain why water markets often do not function well. It describes the tragedy of the anticommons. The chapter explains how use rights in water are created under the prior appropriation doctrine. It identifies the various rights of exclusion that exist in water transfers generally and in transfers from agricultural irrigation specifically. The combined effect of these multiple rights of exclusion is an anticommons in the water markets in the American West. The chapter presents two case studies that illustrate the difficulty of water transfers due to the tragedy of the anticommons. The marginal value of water in agriculture is much lower than its value for municipal use and for the production of environmental amenities. The tragedy of the commons and the tragedy of the anticommons exist when exclusion rights are separated from use rights. The tragedy of the commons occurs when there are multiple use rights.
