You need to think in terms of marginal rather than average effects. Diamonds are more expensive than water because the latter is so abundant (at least for now)

You need to think in terms of marginal rather than average effects. Diamonds are more expensive than water because the latter is so abundant (at least for now) that it can profitably be provided for low value use like watering golf courses. It doesn't matter that the first units each household purchases are completely indespensible. There is no neccisary exploitation story with good being sold/labour being provided at a price below the average value to the purchaser. However, it could be that buyers collude to pay less than their marginal value for the procuct.