IDEAS home Printed from https://ideas.repec.org/a/eee/agiwat/v320y2025ics0378377425005670.html

Evaluating the environmental and economic effects of groundwater quotas and markets using multi-agent system simulation and centralized optimal model

Author

Listed:
  • Kamali, Asghar
  • Niksokhan, Mohammad Hossein
  • Ardestani, Mojtaba

Abstract

Groundwater constitutes one of the most critical sources of freshwater for human use, and modeling the interconnection of groundwater (ecological) and human (social) can provide important insights into their interactions. Also, water markets are considered efficient tools to promote the optimal utilization of scarce water resources. A multi-agent system simulation (MASS) model of a groundwater market was developed, building on a previous model, in which self-interested agents trade water use quotas to maximize individual benefits. This model integrates an agent-based platform of NetLogo with the calibrated groundwater model of MODFLOW, incorporating the watershed model of SWAT, using Python-based codes. Then, the free-access, uniform quota on groundwater utilization and groundwater market implemented in the MASS are evaluated against the Centralized Optimal Model (COM) and groundwater market set by a central planner with complete insight, using MATLAB-based codes that integrate MATLAB with the calibrated groundwater model of MODFLOW, incorporating the watershed model of SWAT. This comparison evaluates their economic and environmental impacts using two key metrics: the average annual benefit (AAB) and the violation of streamflow (VSF). The outcomes show that simulations with more realistic, shortsighted, self-interested, and heterogeneous agents (MASS) perform poorly under a uniform quota policy compared to COM, and trading of permits among farmers leads to enhanced economic benefits and, occasionally, a decrease in environmental violations. The Ardabil Plain, located in northwestern Iran, is employed as a case study for this paper.

Suggested Citation

  • Kamali, Asghar & Niksokhan, Mohammad Hossein & Ardestani, Mojtaba, 2025. "Evaluating the environmental and economic effects of groundwater quotas and markets using multi-agent system simulation and centralized optimal model," Agricultural Water Management, Elsevier, vol. 320(C).
    • Handle: RePEc:eee:agiwat:v:320:y:2025:i:c:s0378377425005670
    DOI: 10.1016/j.agwat.2025.109853
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378377425005670
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.agwat.2025.109853?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Easter, K William & Rosegrant, Mark W & Dinar, Ariel, 1999. "Formal and Informal Markets for Water: Institutions, Performance, and Constraints," The World Bank Research Observer, World Bank, vol. 14(1), pages 99-116, February.
    2. Najafi Alamdarlo, Hamed & Pourmozafar, Hosein & Vakilpoor, Mohamad Hasan, 2019. "Improving demand technology and internalizing external effects in groundwater market framework, case study: Qazvin plain in Iran," Agricultural Water Management, Elsevier, vol. 213(C), pages 164-173.
    3. Hang Zheng & Zhongjing Wang & Siyi Hu & Yongping Wei, 2012. "A Comparative Study of the Performance of Public Water Rights Allocation in China," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(5), pages 1107-1123, March.
    4. Grafton, R. Quentin & Horne, James, 2014. "Water markets in the Murray-Darling Basin," Agricultural Water Management, Elsevier, vol. 145(C), pages 61-71.
    5. Rand, William & Rust, Roland T., 2011. "Agent-based modeling in marketing: Guidelines for rigor," International Journal of Research in Marketing, Elsevier, vol. 28(3), pages 181-193.
    6. 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).
    7. Hoppe, Robert A. & MacDonald, James M. & Korb, Penelope J., 2010. "Small Farms in the United States: Persistence Under Pressure," Economic Information Bulletin 58300, United States Department of Agriculture, Economic Research Service.
    8. Qureshi, M. Ejaz & Shi, Tian & Qureshi, Sumaira E. & Proctor, Wendy, 2009. "Removing barriers to facilitate efficient water markets in the Murray-Darling Basin of Australia," Agricultural Water Management, Elsevier, vol. 96(11), pages 1641-1651, November.
    9. Elbakidze, Levan & Vinson, Hannah & Cobourn, Kelly & Taylor, R.Garth, 2018. "Efficient groundwater allocation and binding hydrologic externalities," Resource and Energy Economics, Elsevier, vol. 53(C), pages 147-161.
    10. Phoebe Koundouri, 2004. "Current Issues in the Economics of Groundwater Resource Management," Journal of Economic Surveys, Wiley Blackwell, vol. 18(5), pages 703-740, December.
    11. Iftekhar, M.S. & Tisdell, J.G. & Connor, J.D., 2013. "Effects of competition on environmental water buyback auctions," Agricultural Water Management, Elsevier, vol. 127(C), pages 59-73.
    12. Pulido-Velazquez, Manuel & Andreu, Joaqui­n & Sahuquillo, Andrés & Pulido-Velazquez, David, 2008. "Hydro-economic river basin modelling: The application of a holistic surface-groundwater model to assess opportunity costs of water use in Spain," Ecological Economics, Elsevier, vol. 66(1), pages 51-65, May.
    13. Ali Azizi & Amineh Ghorbani & Bahram Malekmohammadi & Hamid Reza Jafari, 2017. "Government management and overexploitation of groundwater resources: absence of local community initiatives in Ardabil plain-Iran," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 60(10), pages 1785-1808, October.
    14. Nguyen, N.P. & Shortle, J.S. & Reed, P.M. & Nguyen, T.T., 2013. "Water quality trading with asymmetric information, uncertainty and transaction costs: A stochastic agent-based simulation," Resource and Energy Economics, Elsevier, vol. 35(1), pages 60-90.
    15. Robert R. Hearne & K. William Easter, 1997. "The economic and financial gains from water markets in Chile," Agricultural Economics, International Association of Agricultural Economists, vol. 15(3), pages 187-199, January.
    16. Donna Brennan, 2006. "Water policy reform in Australia: lessons from the Victorian seasonal water market ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 403-423, September.
    17. M Ejaz Qureshi & Tian Shi & Sumaira Qureshi & Wendy Proctor & Mac Kirby, 2009. "Removing Barriers to Facilitate Efficient Water Markets in the Murray Darling Basin – A Case Study from Australia," Socio-Economics and the Environment in Discussion (SEED) Working Paper Series 2009-02, CSIRO Sustainable Ecosystems.
    18. J. Doyne Farmer & Duncan Foley, 2009. "The economy needs agent-based modelling," Nature, Nature, vol. 460(7256), pages 685-686, August.
    19. Brennan, Donna C., 2006. "Water policy reform in Australia: lessons from the Victorian seasonal water market," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 1-21, September.
    20. Richard G. Taylor & Bridget Scanlon & Petra Döll & Matt Rodell & Rens van Beek & Yoshihide Wada & Laurent Longuevergne & Marc Leblanc & James S. Famiglietti & Mike Edmunds & Leonard Konikow & Timothy , 2013. "Ground water and climate change," Nature Climate Change, Nature, vol. 3(4), pages 322-329, April.
    21. Khadije Norouzi Khatiri & Mohammad Hossein Niksokhan & Amin Sarang & Asghar Kamali, 2020. "Coupled Simulation-Optimization Model for the Management of Groundwater Resources by Considering Uncertainty and Conflict Resolution," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 34(11), pages 3585-3608, September.
    22. John F. Raffensperger & Mark W. Milke & E. Grant Read, 2009. "A Deterministic Smart Market Model for Groundwater," Operations Research, INFORMS, vol. 57(6), pages 1333-1346, December.
    23. Matchaya, Greenwell & Nhamo, Luxon & Nhlengethwa, Sibusiso & Nhemachena, Charles, 2019. "An overview of water markets in southern Africa: an option for water management in times of scarcity," Papers published in Journals (Open Access), International Water Management Institute, pages 11(5):1-16..
    24. Kuwayama, Yusuke & Brozović, Nicholas, 2013. "The regulation of a spatially heterogeneous externality: Tradable groundwater permits to protect streams," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 364-382.
    25. [WEF] World Economic Forum, 2016. "The Global Risks Report 2016: 11th Edition," Working Papers id:10737, eSocialSciences.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Raffensperger, John F., 2011. "Matching users' rights to available groundwater," Ecological Economics, Elsevier, vol. 70(6), pages 1041-1050, April.
    2. Wheeler, Sarah Ann & Zuo, Alec & Bjornlund, Henning, 2014. "Investigating the delayed on-farm consequences of selling water entitlements in the Murray-Darling Basin," Agricultural Water Management, Elsevier, vol. 145(C), pages 72-82.
    3. Ellen M. Bruno & Richard J. Sexton, 2020. "The Gains from Agricultural Groundwater Trade and the Potential for Market Power: Theory and Application," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(3), pages 884-910, May.
    4. Claire Settre & Jeff Connor & Sarah Ann Wheeler, 2017. "Reviewing the Treatment of Uncertainty in Hydro-economic Modeling of the Murray–Darling Basin, Australia," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 1-35, July.
    5. Pérez-Blanco, C.D. & Gutiérrez-Martín, C., 2017. "Buy me a river: Use of multi-attribute non-linear utility functions to address overcompensation in agricultural water buyback," Agricultural Water Management, Elsevier, vol. 190(C), pages 6-20.
    6. Guilfoos, Todd & Garnache, Cloe & Suter, Jordan F. & Merrill, Nathaniel H., "undated". "Efficiency Gains Arising from Dynamic Groundwater Markets," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258438, Agricultural and Applied Economics Association.
    7. Ansink, Erik & Houba, Harold, 2012. "Market power in water markets," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 237-252.
    8. Yi Liu & Peng Li & Zhiwei Zhang, 2018. "Resilient or Not: A Comparative Case Study of Ten Local Water Markets in China," Sustainability, MDPI, vol. 10(11), pages 1-16, November.
    9. Sheng, Jichuan & Yang, Hongqiang, 2024. "Linking water markets with payments for watershed services: the eastern route of China's South-North Water Transfer Project," Agricultural Water Management, Elsevier, vol. 295(C).
    10. Biggar, Darryl R. & Hesamzadeh, Mohammad Reza, 2022. "Welfare-maximising dispatch and pricing of water in a gravity-fed river network," Energy Economics, Elsevier, vol. 108(C).
    11. Edwyna Harris, 2011. "The Impact of Institutional Path Dependence on Water Market Efficiency in Victoria, Australia," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 25(15), pages 4069-4080, December.
    12. Pérez-Blanco, C. D & Standardi, G., 2019. "Farm waters run deep: a coupled positive multi-attribute utility programming and computable general equilibrium model to assess the economy-wide impacts of water buyback," Agricultural Water Management, Elsevier, vol. 213(C), pages 336-351.
    13. Kirby, Mac & Bark, Rosalind & Connor, Jeff & Qureshi, M. Ejaz & Keyworth, Scott, 2014. "Sustainable irrigation: How did irrigated agriculture in Australia's Murray–Darling Basin adapt in the Millennium Drought?," Agricultural Water Management, Elsevier, vol. 145(C), pages 154-162.
    14. Sarah Wheeler & Henning Bjornlund & Martin Shanahan & Alec Zuo, 2008. "Price elasticity of water allocations demand in the Goulburn-Murray Irrigation District ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(1), pages 37-55, March.
    15. Robert Brooks & Edwyna Harris & Yovina Joymungul, 2013. "Price clustering in Australian water markets," Applied Economics, Taylor & Francis Journals, vol. 45(6), pages 677-685, February.
    16. Shaneyfelt, Calvin R. & Schoengold, Dr. Karina, 2014. "Irrigation Demand in a Changing Climate: Using disaggregate data to predict future groundwater use," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170586, Agricultural and Applied Economics Association.
    17. Changhai Qin & Shan Jiang & Yong Zhao & Yongnan Zhu & Qingming Wang & Lizhen Wang & Junlin Qu & Ming Wang, 2022. "Research on Water Rights Trading and Pricing Model between Agriculture and Energy Development in Ningxia, China," Sustainability, MDPI, vol. 14(23), pages 1-15, November.
    18. Mitter, Hermine & Schmid, Erwin, 2021. "Informing groundwater policies in semi-arid agricultural production regions under stochastic climate scenario impacts," Ecological Economics, Elsevier, vol. 180(C).
    19. Chandra, Yanto & Wilkinson, Ian F., 2017. "Firm internationalization from a network-centric complex-systems perspective," Journal of World Business, Elsevier, vol. 52(5), pages 691-701.
    20. M. Ejaz Qureshi & Jeff Connor & Mac Kirby & Mohammed Mainuddin, 2007. "Economic assessment of acquiring water for environmental flows in the Murray Basin ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(3), pages 283-303, September.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:agiwat:v:320:y:2025:i:c:s0378377425005670. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/agwat .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.