The Competitiveness, Bargaining Power, and Contract Choice in Agricultural Water Markets in Pakistan: Implications for Price Discrimination and Environmental Sustainability

Pakistan is the world’s third-largest user of groundwater and fourth-largest withdrawing country. The Indus Basin aquifer from where withdraws its has become most “overstressed” aquifer. Given growing shortages surface groundwater, informal markets farmers trade water have emerged in all provinces Pakistan. Despite considerable attention paid to analysis several countries, there little evidence on structure implications contractual agreements between users. This study includes buyers’ bargaining power contract choice model estimate unbiased determinants choice. data was collected through a comprehensive survey Punjab’s markets. Using descriptive econometric approaches, we find that are relatively competitive. A flat-rate marketing common water-scarce regions, while fuel-based areas with large farmers. We primarily determined by an agent’s ability influence joint decision buyers sellers. In addition, seller’s landholding size also influences contract, as contracts more likely be offered relative contracts, although this offers lower profits price discrimination which well-off long history sellers may receive discounts form contracts. As determine extent use, these findings for environmental sustainability. Policy intervention standardize can help reduce overexploitation externalities promote sustainable development.