Beschreibung:
<jats:p>The concept of a water use property right is developed which does not apply to water volumes as such but to a share of the capacity (not contents) of river storage reservoirs and their inflows. The shareholders can withdraw water from their share over time in accordance with their preferences for stability of water deliveries. The reservoir authority does not manage reservoir releases but keeps record of individual shareholder's withdrawals and net inflows to monitor the quantity of water in each shareholder's capacity share. A surplus of total reservoir contents over the sum of the contents of the individual shareholder's capacity shares will accrue over time. Two different criteria for its periodic distribution among shareholders are compared. A previous paper Dudley (this issue(<jats:italic>b</jats:italic>)) noted a loss of short‐run economic efficiency as reservoir and farm management decision making become separated. This is largely overcome by capacity sharing which allows each user to integrate the management of their portion of the reservoir and their farming operations. The nonattenuated nature of the capacity sharing water rights also promotes long‐run economic efficiency.</jats:p>