A Methodology for Water Allocation and Pricing Based on Local Water Marketing and Stakeholders Hierarchy

In this study, a new framework is developed for determining an optimized crop pattern and water pricing for agricultural use. to do this, two different approaches have been taken. In the first approach, determination of the crop pattern and price of water is carried out using an optimization model with the objective of maximizing the benefit of the regional water company, which is in charge of selling water to agricultural sectors, based on a leader-follower concept. In the second approach, the optimized crop pattern and water price are determined using an optimization model with the objective of maximizing the Nash product of benefits of agricultural sectors. In both approaches, the problems solved considering a local water market between agricultural sectors. The developed approaches are applied to a case study of five neighboring farms in the Mahyar Plain, Isfahan. Based on the results of the first approach considering a local water market, the optimal price of selling one cubic meters of water by the regional water company to the farmers would be 2490 Rials and the price of selling water in the market would be 5250 Rials. The values of average annual benefit of the regional water company and farmers are higher than those gained for the case of not having a local water market. In the second approach, selling one cubic meters of water at 2500 Rials by the regional water company and 6300 Rials in the local market give the highest average annual benefit for both water company and farmers.