In this study, the reaction of farmers to possible changes in the price and supply of irrigation water aimed at encouraging water-use efficiency and their effects on the social and private benefits were analyzed by using positive mathematical programming method and considering 12 scenarios.Scenarios considered are: increasing 20, 40, 60 and 100 percent in the price of water along with 10 and.20 percent reduction in the available water supply; 80 percent increase in the price of water and 50 percent decrease in the water supply (drought condition); 20 percent increase in the price of water and 10 percent decrease in water supply (in Mashhad plain); liberalization of sugarbeet and fertilizer markets along with 10 percent decrease in water supply at the farm level. The finding showed that, under conditions of markets failure (externality) and distorting polices, raising water price and decreasing water supply, increase social benefit at the expense of private benefit.Farmers react to increasing water price by changing their cropping patterns but, do not necessarily decrease their total water consumption. However, the amount of water applied to each crop may increase. Decrease or remained unchanged. Results also showed that, in the presence of market failure and distorting policies, drought may not affect social benefits significantly. Moreover, the effects of product and factor price policies on the cropping patterns were different. That is, decreasing product price results in greater change in cultivated are acompared to increasing input prices.Based on the finding of this study, it can be concluded that, careful identification of policy target seems to be important in policy decision.