IDEAS home Printed from https://ideas.repec.org/p/ags/eaae11/114272.html
   My bibliography  Save this paper

Can Hydro-economic River Basis Models Simulate Water Shadow Prices Under Asymmetric Access?

Author

Listed:
  • Britz, Wolfgang
  • Kuhn, Arnim

Abstract

Hydro-economic river basin models (HERBM) based on mathematical programming are conventionally formulated as explicit ‘aggregate optimization’ problems with a single, aggregate objective function. Often unintended, this format implicitly assumes that decisions on water allocation are made via central planning or functioning markets such as to maximize social welfare. In the absence of perfect water markets, however, individually optimal decisions by water users will differ from the social optimum. Classical aggregate HERBMs cannot simulate that situation and thus might be unable to describe existing institutions governing access to water and produce biased results for alternative ones. We propose a new solution format for HERBMs, based on Mixed Complementarity Programming (MCP), where modified shadow price relations express spatial externalities resulting from asymmetric access to water use. This new problem format, as opposed to commonly used linear (LP) or non-linear programming (NLP) approaches, enables the simultaneous simulation of numerous ‘independent optimization’ decisions by multiple water users while maintaining physical interdependences based on water use and flow in the river basin. We show that the alternative problem format allows formulating HERBMs that yield more realistic results when comparing different water management institutions.

Suggested Citation

  • Britz, Wolfgang & Kuhn, Arnim, 2011. "Can Hydro-economic River Basis Models Simulate Water Shadow Prices Under Asymmetric Access?," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114272, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaae11:114272
    as

    Download full text from publisher

    File URL: http://purl.umn.edu/114272
    Download Restriction: no

    References listed on IDEAS

    as
    1. J. W. B. Guise & J. C. Flinn, 1970. "The Allocation and Pricing of Water in a River Basin," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 52(3), pages 411-421.
    2. Burness, H. Stuart & Brill, Thomas C., 2001. "The role for policy in common pool groundwater use," Resource and Energy Economics, Elsevier, vol. 23(1), pages 19-40, January.
    3. Rosegrant, M.W. & Ringler, C. & McKinney, Daene C. & Cai, X. & Keller, Andrew & Donoso, G., 2000. "Integrated economic-hydrologic water modeling at the basin scale: the Maipo river basin," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 24(1), December.
    4. Doppler, Werner & Salman, Amer Z. & Al-Karablieh, Emad K. & Wolff, Heinz-Peter, 2002. "The impact of water price strategies on the allocation of irrigation water: the case of the Jordan Valley," Agricultural Water Management, Elsevier, vol. 55(3), pages 171-182, June.
    5. Fernandez, Linda, 2006. "Natural resources, agriculture and property rights," Ecological Economics, Elsevier, vol. 57(3), pages 359-373, May.
    6. Barreteau, O. & Bousquet, F. & Millier, C. & Weber, J., 2004. "Suitability of Multi-Agent Simulations to study irrigated system viability: application to case studies in the Senegal River Valley," Agricultural Systems, Elsevier, vol. 80(3), pages 255-275, June.
    7. Evans, Elizabeth M. & Lee, David R. & Boisvert, Richard N. & Arce, Blanca & Steenhuis, Tammo S. & Prano, Mauricio & Poats, Susan V., 2003. "Achieving efficiency and equity in irrigation management: an optimization model of the El Angel watershed, Carchi, Ecuador," Agricultural Systems, Elsevier, vol. 77(1), pages 1-22, July.
    8. Ferris, Michael C. & Munson, Todd S., 2000. "Complementarity problems in GAMS and the PATH solver," Journal of Economic Dynamics and Control, Elsevier, vol. 24(2), pages 165-188, February.
    9. Brandes, Wilhelm, 1989. "On the Limitations of Armchair Economics: Some Views of an Armchair Agricultural Economist," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 16(3), pages 319-343.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Hydro-economic river basin model; mixed complementarity programming; water institutions; externalities; Resource /Energy Economics and Policy;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:eaae11:114272. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: http://edirc.repec.org/data/eaaeeea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.