Evaluation of water market performance and its comparison with different allocation rules of water in drought conditions

The purpose of this study is to simulate and evaluate the water market's efficiency and compare it with the law of optimal allocation of water and allocations based on fixed and proportional quotas. The study area is located in the Jiroft sub basin in the Hali Rood watershed and data are for 2015 which were obtained from the Agricultural Jihad Organization of southern Kerman province. The method used is calculate the benefit from irrigation and minimize income losses in the entire region. For this purpose, the first 20% and 30% restrictions was imposed on use of groundwater resources, and then the effects of optimal allocation law, allocations based on proportional and fixed quotas on the benefits of irrigation were investigated. Subsequently, through the water market simulation, the market performance was analyzed after the implementation of these rules. To investigate the effect of transaction costs on water trade, transaction costs were considered, zero, 5, 10, 20 and 30 percent of water price. Based on the results, if the conditions of perfect competition are on the market and transaction costs are zero, the optimal allocation and formation of the water market will result in the same final allocation of water rights and irrigation benefits for the whole region. Also, by reducing the availability of water resources, the benefits of water trade will increase and with increasing transaction costs, reduces the volume of water exchanged and the gains from trade.