Description: Monopoly Power and Distribution in Fragmented Markets : The Case of Groundwater

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Monopoly Power and Distribution in Fragmented Markets : The Case of Groundwater

Using data from Pakistan's Punjab, the authors examine monopoly power in the market for groundwater - irrigation water extracted using private tubewells - a market characterized by barriers to entry and spatial fragmentation. Simple theory pre...

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Bibliographic Details
Main Authors:	Jacoby, Hanan G., Murgai, Rinku, Rehman, Saeed Ur
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	BORE HOLE CANAL CLOSURE CANAL IRRIGATION CANAL WATER CANALS CHANNEL CHANNELS CONVEYING CROP YIELDS CULTIVATED AREA DEMAND FOR WATER DISCHARGE DROUGHT EXPORT FARMERS FARMING GROUNDWATER GROUNDWATER COSTS GROUNDWATER EXTRACTION GROUNDWATER MARKET GROUNDWATER PRICES GROUNDWATER PUMPING GROUNDWATER USE IRRIGATION IRRIGATION WATER MONOPOLY POWER PEAK DEMAND PERIODS PEAK-LOAD PRICING PRICE DISCRIMINATION RAINFALL RESERVOIRS RIVERS SEEPAGE WATER ALLOCATION WATER AVAILABILITY WATER DELIVERIES WATER DEMAND WATER FLOW WATER MANAGEMENT WATER MARKETS WATER QUALITY WATER SUPPLIES WATER VOLUME WATERCOURSES
Online Access:	http://documents.worldbank.org/curated/en/2001/06/1490132/monopoly-power-distribution-fragmented-markets-case-groundwater http://hdl.handle.net/10986/19602

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Summary:	Using data from Pakistan's Punjab, the authors examine monopoly power in the market for groundwater - irrigation water extracted using private tubewells - a market characterized by barriers to entry and spatial fragmentation. Simple theory predicts that tubewell owners should price-discriminate in favor of their own share tenants. And this analysis of individual groundwater transactions over an 18-month period confirms such price discrimination. And among those studied, tubewell owners and their tenants use considerably more groundwater on their plots than do other farmers. The authors also provide evidence that monopoly pricing of groundwater leads to compensating - albeit small - reallocations of canal water, which farmers exchange in a separate informal market. Despite the substantial misallocation of groundwater, a welfare analysis show that monopoly pricing has limited effects on equity and efficiency. In the long run, a policy aimed at eliminating monopoly pricing would do little to help the poorest farmers.