This article models and estimates the efficiency gains from using market‐based instruments relative to command and control to manage groundwater. A theoretical model of an imperfectly competitive groundwater market is developed to show how the magnitude and distribution of the gains from trade change as market structure varies. Market structure is a key consideration because future groundwater markets will likely feature geographic limitations to trade, large agricultural players, and a legal environment that is conducive to forming cartel‐like coalitions. Application of the model to a groundwater‐dependent agricultural region in southern California shows the existence of large gains from trade, despite the potential for market power, with benefits up to 36% greater than that under command and control. Distributional impacts, however, can be sizable even for small degrees of market power. Simulations that vary market conditions show that results likely generalize to other groundwater basins.

中文翻译：

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农业地下水贸易的收益和市场支配力的潜力：理论与应用

本文对使用与指挥和控制相关的基于市场的工具管理地下水的效率收益进行建模和估计。开发了一个不完全竞争地下水市场的理论模型，以显示贸易收益的大小和分布如何随着市场结构的变化而变化。市场结构是一个关键的考虑因素，因为未来的地下水市场可能具有贸易地域限制、大型农业参与者以及有利于形成类似卡特尔联盟的法律环境。将该模型应用于南加州依赖地下水的农业区表明，尽管存在市场支配力的潜力，但贸易仍存在巨大收益，其收益比命令和控制下的收益高出 36%。然而，分布影响 即使市场力量很小，也可以是相当大的。不同市场条件的模拟表明，结果可能适用于其他地下水流域。