Cover: Monopoly and Micro-Irrigation in Smallholder Water Markets

Monopoly and Micro-Irrigation in Smallholder Water Markets

Using Exploratory Modeling to Consider Interactions between Market Structure and Agriculture Technology Subsidies

by Benjamin P. Bryant

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Abstract

Many rural agricultural areas around the world are facing severely depleted groundwater resources, which farmers rely on to increase agricultural productivity through irrigation. If groundwater in these areas is to be sustainably utilized, total withdrawals must be diminished from their current levels, which may cause a welfare loss on the part of farmers and their communities. The level of welfare loss (if any) and its distribution will depend which of a wide array of policies are implemented to curtail water use. In theory, the policies may take many forms, including direct and indirect rationing, direct and indirect marginal pricing, tradable water rights, and subsidizing water efficient technologies such as microirrigation. Depending on the environment in which they are implemented, these policies vary widely in terms of cost, effectiveness, and political feasibility, and may lead to many non-obvious interactions when multiple policies are implemented simultaneously.

This research contributes to a policy debate motivated by the situation in North Gujarat, India, where a mix of recently enacted policies has somewhat helped to improve the groundwater situation, but in an inefficient manner. Specifically, this research is aimed at understanding the changes water market participants may experience should there be a move to formalize water markets and establish tradable water rights — a costly and politically challenging proposition, but one with ostensibly significant advantages.

Table of Contents

  • Chapter One

    Challenges of Fair and Efficient Groundwater Management in North Gujarat and Beyond

  • Chapter Two

    Building a picture of smallholder decisionmaking

  • Chapter Three

    An individual-based model of smallholder water markets

  • Chapter Four

    Designing the set of computational experiments

  • Chapter Five

    When is formalizing pre-existing water markets a good idea?

  • Chapter Six

    Conclusions, Contributions, and Future Possibilities

  • Appendix A

    Lessons Learned for the Practice of Exploratory Modeling and Scenario Discovery

  • Appendix B

    Solution properties and procedures for price-takers and the competitive market module

  • Appendix C

    Solution properties and details of the monopolist's module

This document was submitted as a dissertation in September 2013 in partial fulfillment of the requirements of the doctoral degree in public policy analysis at the Pardee RAND Graduate School. The faculty committee that supervised and approved the dissertation consisted of Robert Lempert (Chair), Krishna Kumar, and Anthony Westerling.

This report is part of the RAND Corporation dissertation series. PRGS dissertations are produced by graduate fellows of the Pardee RAND Graduate School, the world's leading producer of Ph.D.'s in policy analysis. The dissertations are supervised, reviewed, and approved by a PRGS faculty committee overseeing each dissertation.

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