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This paper develops and applies an economically driven simulation model for California’s Friant-Kern system, a region characterized by diverse water sources employed predominantly for commercial irrigated agriculture, with significant local water trading activity. The economic-engineering simulation approach highlights the importance of representing user economic decisions for water systems in a context of complex physical and infrastructure systems dominated by economic water uses. The model simulates how water users conserve, select supplies and make water exchange and market decisions in response to water costs and availability, and provides estimates of economic and operational impacts of alternative policies for the Friant-Kern system. Results show that high surface water prices cause farmers to pump more groundwater, disturbing an existing conjunctive use system and aggravating regional groundwater overdraft. [ABSTRACT FROM AUTHOR]

Farmers make joint water and land use decisions for economic purposes based in part on water availability and reliability. A two-stage economic production model is developed to examine the effects of hydrologic uncertainty and water prices on agricultural production, cropping patterns, and water and irrigation technology use. The model maximizes net expected farm profit from permanent and annual crop production with probabilistic water availability and a variety of irrigation technologies. Results demonstrate effects of water availability, price, and reliability on economic performance, annual and long-run cropping patterns, and irrigation technology decisions. Variations in water price and availability affect the desirability of different irrigation technologies. Increased water supply reliability can raise the probability of higher economic returns and promote more effective use of water for permanent crops. Such economic benefits can be compared to costs of operational changes and programs to increase water supply reliability for agricultural areas. [ABSTRACT FROM AUTHOR]