Water Resource Management in Arid Environs

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Abstract
The intertemporal problem of conjunctive management of a reservoir and an aquifer in an arid environment is the central theme of this paper. The model formulated focuses on several interrelated questions associated with maximizing a benefit function based on agriculture production with given stocks of water and expected water receipts, namely, the optimum pattern of land use and production, the optimum intertemporal allocation of water, and the optimum rate of investment in capital for water distribution. Periodic extractions of water from the reservoir and the aquifer are carried to the point where the value of water in current use equals the marginal expected value of water stored in each stock. The marginal expected storage value of the reservoir stock is discounted by water losses as well as by interest rates. We also show that the optimum rate of investment is that determined by equating marginal investment costs with the present value of future production attributable to savings in distribution losses after discounting by interest rates and depreciation.

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