Market vis-à-vis command and control approaches have been widely adopted in natural resource and environmental management since the 1980s. Adoption of markets in managing irrigation water resources is also emerging. It has been argued that markets are ineffective in managing the demand for irrigation water due to very low price elasticity. Most studies have been based on mathematical models simulating water markets and not on observed prices and quantities in real water markets since such data are rarely available. In Oman, perhaps in response to the extreme scarcity of water, elaborate water demand management institutions emulating markets have evolved and have been used for centuries. Water entitlements are leased based on prices through a community auction. The traded quantities of water and related prices have been recorded. This study uses this unique data set to estimate the elasticity of irrigation water. A log function on quantity and price of irrigation water is used with dummy variables on time and type of irrigation system. The price elasticity varies from -0.10 to -0.28, depending on the specifications of the econometric model. These estimates are higher than most estimates reported in past studies, indicating the efficacy of the indigenous market-based irrigation water management institution adopted in Oman.

Market vis-à-vis command and control approaches have been widely adopted in natural resource and environmental management since the 1980s. Adoption of markets in managing irrigation water resources is also emerging. It has been argued that markets are ineffective in managing the demand for irrigatio...