Modeling Water Markets and Related Policies: The Case of Irrigation in Southern Cyprus

This dissertation presents a model water market using the island of Cyprus as a case study. It explores how the agricultural economics of the region would be affected by the water market. Policy changes addressing concerns from the market results are then suggested and applied to the model.;A simple and generalizable model was made to simulate two types of water markets which allows for water trading within and between irrigation districts. This water market featured the concept of a survival level of water, a volume of water set aside for permanent crops to keep them alive. This allowed permanent crops to be included in the water market. This model was applied to a series of irrigation districts along the southern shore of Cyprus connected via the Southern Conveyor Project.;Results show the potential for great improvements to overall net agricultural benefits in the region if both water markets were in place. Specifically results show that most of the increases in net profits gained are from trading within each district rather than from trading between districts. Results also imply that currently while physical water scarcity exists in that the demands cannot be fully met, there usually is no water scarcity from an economic standpoint.;Two policies options are introduced to better improve the economic conditions based on the trends seen in the model results. It is observed from the model that certain permanent crops are not profitable, yet currently represent a large volume of the water demand. Under a water market, these crops would always sell all their water allocations to others. The two policies addressed this directly and allow the water managers in the government of Cyprus to respond directly to the water demands from permanent crops. One policy addresses permanent crops that consistently sold their water in a water market; the other policy specifically addresses olive crops only. Results from both policies show significant improvements over running a basic water market without them being used.