Multicrop Production Decisions in Western Irrigated Agriculture: The Role of Water Price

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Abstract
Applying a model of the multioutput firm, econometric results are reported for irrigated production in four multistate regions of the American West. Cross‐sectional microdata from the Farm and Ranch Irrigation Survey and limited‐dependent variable methods are used to estimate crop‐choice, supply, land allocation, and water demand functions for field crops. Farm‐level water demand is decomposed into the sum of crop‐level water demands, and crop‐level demands are further separated into an extensive margin (land allocations) and intensive margin (short‐run water use). Response to water price (measured as groundwater pumping cost) occurs primarily at the extensive margin.

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