The objective of this paper is to conduct theoretical inquiries and empirical analysis on the issue of institutional evolution for resource management, focusing on irrigation water, a traditional local common property resource. Two management schemes for inigation water, a community management regime (tank irrigation) and an individualised management regime (well irrigation), are compared in terms of rice production efficiency. Using farm household data collected by the authors in Tamil Nadu, India, it is found that the profit of rice production using well water only is low due to the high labour input required for well irrigation management. Then, estimation of the profit function reveals that the profit of farmers using both tank and well water is statistically significantly higher than that of farmers who use either well water only or tank water only. The result, based on game theoretical inquiries, implies that in equilibrium tank and well inigation can coexist. Moreover, it is calculated that about 90% of farmers will use wells in equilibrium. Considering that well users are only 37% of all farmers at present, the number of wells will increase. © 2001 Elsevier Science B. V. All rights reserved.