Analysis of social network effects on water trade in an informal water market

Abstract

This paper proposes a novel agent-based model (ABM) to assess actual informal water market (IWM) trade—a highly common form of reallocating water globally, but where analysis is challenging due to data paucity. Because, typically, there is not an integrated or centralized institution coordinating transactions in IWM, social networks and communications between farmers play a key role. This, hence, makes applications of ABMs in the informal space appealing and useful. Survey and interview data are used for the model development via a sample of farmers in Mojen Area, Iran. Also, in the final model, some critical human behaviors (e.g. adaptability and self-interest) are described in the form of parameters and formulas, with optimum values calibrated based on the Mojen sample as well as making a detailed assessment of the effects on water transaction and farmers’ profit margin. The result of the simulation reveals that IWM trade frees water for use by other farmers in the Mojen area; especially when stronger social networks are in place where the average number of water transactions will be increased—about 50%. The presence of IWMs also contributes to a more stable cultivation area in dry years, where water trading helps protect perennial crops that have become an increased production system choice in recent years. In fact, water market helps farmers to optimally use water supply in order to deal with lower rainfall years. Moreover, farmers may well use the water market in appropriate rainy years due to increasing cultivation area