Economic analysis of the secondary water market and determination of the equilibrium price (Case study: Qazvin province)

Document Type : Research Paper

Authors

1 Department of Water Science and Engineering, Faculty of Agriculture and Natural Resources, Imam Khomeini International University, Qazvin, Iran.

2 Department of Accounting, Faculty of Social Sciences, Imam Khomeini International University, Qazvin, Iran.

3 Executive Director of Qazvin Province Water Rights Market Project, Qazvin, Iran.

10.22059/jwim.2025.395033.1229

Abstract

The increase in water demand and the uncontrolled harvesting of groundwater resources in the Qazvin Plain has led to a sharp drop in groundwater levels and adverse environmental consequences. Since 2023, the right market has been established, including productivity markets (selling water from agriculture to industry) and secondary markets (selling water from agriculture to agriculture) in order to increase productivity and protect groundwater resources in the province. The study was conducted to identify factors affecting supply, demand and supply function estimation, demand function and water equilibrium price estimation. Using data on traded water volume, selling price, production costs, well specifications, irrigation technologies, annual water share, cultivated area, storage coefficient, farmer income, and temperature from July 2023 to December 2024, supply and demand functions were estimated using the ordinary least squares regression method. The price coefficient in the estimated demand function is equivalent to -0.663 and in the supply function it is equivalent to -2.091. The equilibrium price of water in the secondary market was estimated at 4682 tomans and the results of the sensitivity analysis showed that the equilibrium price is highly sensitive to temperature , as well as the estimated equilibrium price in the water market is higher than the penalty for excessive water withdrawal in this plain. This can lead to a decrease in farmers' willingness to purchase water from the secondary market and an increase in unauthorized groundwater extraction. Therefore, it is recommended to revise the regulations regarding penalties for excessive water withdrawal from authorized wells.

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References

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Water and Irrigation Management
Volume 15, Issue 3
December 2025
Pages 543-562

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