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003155 Page 54 uses in the Lower Basin are higher than those of similar uses in the Upper Basin. This is true both because competition for water is greater in the Lower Basin and because Lower Basin agriculture is more productive than it is at higher elevations in the Upper Basin. Market forces, therefore, will favor the Lower Basin over the Upper Basin and, within each basin, will favor municipal and industrial water uses over irrigation. As discussed previously, the projected effects upon the use of increased Colorado River flows of removing the existing structure of interstate water allocation institutions (the law of the river) were minor, except under assumed major demand increases in both the Upper and Lower Basins. However, the projected effects of this radical institutional change upon overall Colorado River water use were more interesting. Table V-2, Case 2, shows the effect of enhanced flows under the unconstrained institutional setting. Table V-4 shows the net change in water use attributable to institutional change. ~ Under present demand conditions, the effect is one of eliminating a substantial share of Lower Basin water shortages while increasing evaporation and channel losses and decreasing outflows to Mexico. Under the higher demands which characterize the full development scenario, however, an even larger reduction in shortages occurs as a result of institutional change. Major Lower Basin shortages are eliminated at the cost of much smaller shortages in Upper Basin water use. The full development scenario is characterized by a 52 percent increase in Upper Basin water demands over current levels and a 20 percent increase in Lower Basin demands. I Under these circumstances, the removal of institutional constraints on interstate transfers of water produces an alleviation of Lower Basin shortages of 535 thousand acre-feet at the cost of increasing Upper Basin shortages by