An increasing number of regions have unsustainable groundwater balance due to overdraft. For most of them, agriculture is taking the larger share of water extractions and other sectors demands are growing rapidly. Therefore, the main objective of policy-makers is to induce a reduction of water use by the agricultural sector to achieve sustainability in aquifer management and a reallocation of water to other sectors. We present the impact of water demand-management strategies on small-scale groundwater irrigated systems in the Bajío guanajuatense, centre of Mexico. These systems present the peculiarity that they are owned and managed collectively by farmers' groups. We study the impact of changing collective rules on farmers' water demand and revenues, knowing that certain rules induce strategic behaviours (freeriding). Farmers' decisions are represented by mathematical programming models as mixed complementarity problem (MCP). Simultaneous optimizations of members' utility functions, considering their technical constraints, result in a non-cooperative equilibrium. Non-cooperative and cooperative equilibriums, whereby all farmers would contribute to a unique and additive utility function, are compared. The gap between the two equilibriums represents the maximum gain that could be achieved through proper institutional change, i.e. new rules that would eliminate strategic behaviours. Therefore, it brings a quantitative perspective to the debate on the role of organizations in addressing natural resources degradation. Results show that, at current electricity price, water consumption by coopera-tive and non-cooperative wells are not significantly different. However, cooperation does have an effect on water allocation between members. Therefore, institutional change within groups is more likely to have an effect on water allocation than global water consumption. However, when electricity prices are increased, difference in consumption between cooperative and non-cooperat