Like the allocation of water resources among water users, the distribution of allocated water to the subusers requires an estimate of the economic costs and benefits from a number of distribution alternatives. The most satisfactory solution maximizes the benefit cost ratio. This study is based on the premise that equitable water distribution to agricultural subusers can be more easily accomplished through the use of a technique to predict the marginal value of agricultural water. A hydro-economic model is formulated to distribute the water supply to the crops and to determine the unit value of water for the given supply. By incrementing the supply, the marginal value of water for a given cropping pattern is determined. Water is in short supply if the potential evapotranspiration of all the crops can not be satisfied. The link between the economic and hydrologic system is the production function which is the relationship between the actual evapotranspiration and the yield of the crop. Other variables affecting crop production are assumed to be relatively constant. The simulation model is applied to a prototype system to demonstrate the applicability of the model to management and planning problems. The model provides a means of determining the marginal value of water in water short years where potential evapotranspiration of all crops can not be met.
Packer, Murland R.; Riley, J. Paul; Hiskey, Harold H.; and Israelsen, Eugene K., "Simulation of the Hydrologic-Economic Flow System in an Agricultural Area" (1969). Reports. Paper 169.