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...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2001/06/1490132/monopoly-power-distribution-fragmented-markets-case-groundwater http://hdl.handle.net/10986/19602 |
| 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. |
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