Agent-Based Water Market Model: An Analysis Through a Case Study

The case of the water use rights market established in the Chilean Water Code since 1981 has been the subject of great study interest, as it is one of the few places in the world where a model based on the water rights trade is applied. Systems such as water systems and water markets are intrinsically complex, exhibiting non-linear interactions that may result in emergent behaviors. This study examines the development of a conceptual framework for an agent-based model of a groundwater rights market, with a specific case study of the Copiapó river basin in northern Chile. Real transaction data from the years 2007-2021, which has been officially registered in public institutions, has been analyzed to provide insight into the model development. The aim of this research is to develop a conceptual framework based on the virtualization of a double auction marketplace. This market works in a probabilistic model, where the behavior of variables affects the agents' disposition to buy and to sell. The agents compute a probability based on their willingness to accept higher or lower prices. We show how the ABM can be calibrated and validated, and discuss how it can be turned into an experimental laboratory. This approach could be useful for studying water management strategies and emerging behaviors, such as the generation of possible price bubbles, or for studying the conditions and causes of the water crisis. It could also be used to evaluate possible solutions.