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Agent-Based hydro-economic modelling for analysis of groundwater-based irrigation Water Market mechanisms

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  • Aghaie, Vahid
  • Alizadeh, Hosein
  • Afshar, Abbas

Abstract

Agricultural water markets play a crucial role in arid and semi-arid regions by reallocating water and transferring it from low-value uses to high-value uses. Several markets for surface water and groundwater are functioning all over the world to increase economic well-being of farmers and meet environmental flow requirements. However, there is not a consensus on precisely which market mechanism may be more environmentally and economically beneficial. This study presents an agent-based groundwater market model to analyze the economic and hydrologic impacts of three market mechanisms, designed based on the cap-and-trade scheme, that differ in the price discovery process, two of which are uniform price double-auction and the third is a discriminatory price double-auction. This study also analyzes the hydrologic and economic impacts of water buyback programs. Modeling results, applied to Rafsanjan Plain, an arid region in Iran, show that the discriminatory price double-auction is the most hydrologically and economically advantageous mechanism since it reduces the annual water level drawdown by 38 % and brings about more profits for farmers in comparison with other market mechanisms. Furthermore, the buyback program effectively reduces the inequality of wealth distribution (Gini Index) and increases farmers' net benefit while reducing their surplus.

Suggested Citation

  • Aghaie, Vahid & Alizadeh, Hosein & Afshar, Abbas, 2020. "Agent-Based hydro-economic modelling for analysis of groundwater-based irrigation Water Market mechanisms," Agricultural Water Management, Elsevier, vol. 234(C).
    • Handle: RePEc:eee:agiwat:v:234:y:2020:i:c:s0378377419319316
    DOI: 10.1016/j.agwat.2020.106140
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    1. Bahrami, Nafiseh & Afshar, Abbas & Afshar, Mohammad Hadi, 2022. "An agent-based framework for simulating interactions between reservoir operators and farmers for reservoir management with dynamic demands," Agricultural Water Management, Elsevier, vol. 259(C).
    2. Emami, Somayeh & Dehghanisanij, Hossein & Hajimirzajan, Amir, 2024. "Agent-based simulation model to evaluate government policies for farmers’ adoption and synergy in improving irrigation systems: A case study of Lake Urmia basin," Agricultural Water Management, Elsevier, vol. 294(C).
    3. Anbari, Mohammad Javad & Zarghami, Mahdi & Nadiri, Ata-Allah, 2021. "An uncertain agent-based model for socio-ecological simulation of groundwater use in irrigation: A case study of Lake Urmia Basin, Iran," Agricultural Water Management, Elsevier, vol. 249(C).
    4. Sheng, Jichuan & Cheng, Qian & Yang, Hongqiang, 2024. "Water markets and water inequality: China's water rights trading pilot," Socio-Economic Planning Sciences, Elsevier, vol. 94(C).
    5. Fei, Rilong & Xie, Mengyuan & Wei, Xin & Ma, Ding, 2021. "Has the water rights system reform restrained the water rebound effect? Empirical analysis from China's agricultural sector," Agricultural Water Management, Elsevier, vol. 246(C).
    6. Duan, Yeqing & Zhou, Shenbei & He, Jiangping & Bai, Minghao, 2024. "Improving the performance of agricultural temporary water markets: The role of technology-based and transaction-based subsidies," Agricultural Water Management, Elsevier, vol. 303(C).

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