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In rapidly urbanizing semi-arid regions, increasing amounts of historically irrigated cropland lies permanently fallowed due to water court policies as agricultural water rights are voluntarily being sold to growing cities. This study develops an integrative framework for assessing the effects of population growth and land use change on agricultural production and evaluating viability of alternative management strategies, including alternative agricultural transfer methods, regional water ownership restrictions, and urban conservation. A partial equilibrium model of a spatiallydiverse regional water rights market is built in application of the framework to an exemplary basin. The model represents agricultural producers as profit-maximizing suppliers and municipalities as cost-minimizing consumers of water rights. Results indicate that selling an agricultural water right today is worth up to two times more than 40 years of continued production. All alternative policies that sustain agricultural cropland and crop production decrease total agricultural profitability by diminishing water rights sales revenue, but in doing so, they also decrease municipal water acquisition costs. Defining good indicators and incorporating adequate spatial and temporal detail are critical to properly analyzing policy impacts. To best improve agricultural profit from production and sale of crops, short-term solutions include alternative agricultural transfer methods while long-term solutions incorporate urban conservation.

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As populations increase in arid regions of the world, investment in water infrastructure improves resource management by increasing control over the location and timing of water allocation. Many studies have explored freer trade as a substitute for additional infrastructure investment. We instead quantify how water allocation institutions, reservoir management objectives, and storage capacity influence the value derived from a reservoir system. We develop a stochastic dynamic programming model of a reservoir system that faces within‐year variation in weather‐dependent water demand as well as stochastic semiannual inflows. We parameterize the model using the Colorado‐Big Thompson system, which transports stored water from the West Slope of the Rocky Mountains to the East Slope. We then evaluate the performance of the system under five institutional settings. Our results suggest that rigid allocation mechanisms and inefficient management objectives result in a decrease of up to 13% in the value generated from stored water when compared to a free trade scenario, an impact on par with predicted losses associated with climate‐change‐induced inflow reductions. We also find that under biased management objectives, increasing storage capacity can decrease the social value obtained from stored water.