“…Systems such as these may be able to address water scarcity efficiently, but they do not solve the problem of optimal water extraction during a drought. More elaborate systems of tradable water rights, which span all possible states of nature, have the potential to account for the problems with droughts if the rights are extended to cover all possible future markets (see, e.g., Berck & Lipow, ; Brewer, Glennon, Kerr, & Libecap, ; Hanah & Stryjaski, ; Zilberman & Schaenguld, ).…”