Evaluating the impacts of farmers' behaviors on a hypothetical agricultural water market based on double auction

Abstract

Agricultural water markets are considered effective instruments to mitigate the impacts of water scarcity and to increase crop production. However, previous studies have limited understanding of how farmers' behaviors affect the performance of water markets. This study develops an agent‐based model to explicitly incorporate farmers' behaviors, namely irrigation behavior (represented by farmers' sensitivity to soil water deficit λ) and bidding behavior (represented by farmers' rent seeking μ and learning rate β), in a hypothetical water market based on a double auction. The model is applied to the Guadalupe River Basin in Texas to simulate a hypothetical agricultural water market under various hydrological conditions. It is found that the joint impacts of the behavioral parameters on the water market are strong and complex. In particular, among the three behavioral parameters, λ affects the water market potential and its impacts on the performance of the water market are significant under most scenarios. The impacts of μ or β on the performance of the water market depend on the other two parameters. The water market could significantly increase crop production only when the following conditions are satisfied: (1) λ is small and (2) μ is small and/or β is large. The first condition requires efficient irrigation scheduling, and the second requires well‐developed water market institutions that provide incentives to bid true valuation of water permits.

Reviewing the decision‐making behavior of irrigators

“…However, ABMs fail to store the memory of agents when undertaking similar decisions in the future, which is one of the major intrinsic factors in the decision‐making process. Machine learning techniques could be used to store the memory of the agents' past decisions (Du, Cai, Brozovi, & Minsker, ; Nguyen‐ky et al, ). Du et al () tried to model irrigators' water trade decisions using ABM and machine learning for a hypothetical water market scenario.…”

“…Machine learning techniques could be used to store the memory of the agents' past decisions (Du, Cai, Brozovi, & Minsker, ; Nguyen‐ky et al, ). Du et al () tried to model irrigators' water trade decisions using ABM and machine learning for a hypothetical water market scenario. However, they only used quantitative information for their model.…”

Water-energy-food nexus: Concepts, questions and methodologies

“…By modelling agents individually, the full effects of the diversity that exists among agents in their attributes and the behaviors can be observed at the bottom level (Macal and North, 2010). What's more, the emergent phenomena at the system level can also be investigated through aggregation of all agents' behaviors (Du et al, 2017).…”

Promoting Competitive Water Resource Use Efficiency at the Water‐Market Scale: An Intercooperative Demand Equilibrium‐Based Approach to Water Trading

“…Water rights are an example of limited access permits, and are a legal mechanism by which individuals and businesses, both public and private, may access water subject to use stipulations (Griffin, ; Rogers, ). Water rights provide opportunities for rights holders to individually or collaboratively employ their allocations to create economic benefits (Du et al, ; Goetz etal, ; Renwick, ). Water rights law varies greatly by region, but generally promotes (Dozier et al, ): Efficient use of water specifically where land ownership is not a prerequisite to obtaining water rights (Howitt, ; Rosegrant & Binswanger, ; Rosegrant & Gazmuri, ). Economic benefits where temporary and permanent water rights transactions are allowed (Cai & Rosegrant ; Rosegrant & Binswanger, ; Rosen & Sexton, ). Reduction of government costs by constraining the total number of water rights which creates a demand ceiling (Bruns & Meinzen‐Dick, ; Donoso, ). Maintaining environmental flows by creating a demand ceiling. Improvements to system reliability and resilience in the face of supply variability (Frederick, ). …”

“…Water rights are an example of limited access permits, and are a legal mechanism by which individuals and businesses, both public and private, may access water subject to use stipulations (Griffin, 2006;Rogers, 2002). Water rights provide opportunities for rights holders to individually or collaboratively employ their allocations to create economic benefits (Du et al, 2017;Goetz et al, 2017;Renwick, 2018). Water rights law varies greatly by region, but generally promotes (Dozier et al, 2017):…”