Willingness to pay for improved irrigation water supply reliability: An approach based on probability density functions

Abstract

In irrigated agricultural systems, the main source of uncertainty to irrigators relates to water supply, as it significantly affects farm income. This paper investigates farmers' utility changes associated with shifts in the probability density function of water supply leading to a higher water supply reliability (higher mean and lower variance in annual water allotments). A choice experiment relying on a mean-variance approach is applied to the case study of an irrigation district of the Guadalquivir River Basin (southern Spain). To our knowledge, this is the first study using parameters of these probability density functions of water supply as choice experiment attributes to value water supply reliability. Results show that there are different types of farmers according to their willingness to pay (WTP) for improvements in water supply reliability, with some willing to pay nothing (44.9%), others (28.6%) with relatively low WTP, and the remainder of farmers (26.5%) having high WTP. A range of factors influencing farmers' preferences toward water supply reliability are revealed, with those related to risk exposure to water availability being of special importance. The results will help to design more efficient policy instruments to improve water supply reliability in semi-arid regions.

Insuring Water Supply in Irrigated Agriculture: A Proposal for Hydrological Drought Index-Based Insurance in Spain

“…In fact, in extreme cases where water allotments are set at zero, he/she must choose a rainfed crop-mix, maintaining olive under rainfed conditions, and substituting irrigated crops with common rainfed options (wheat and sunflower in the case of the Genil-Cabra irrigation district). Table 3 shows the annual gross margin of farm X with full water allotment and under rainfed conditions (zero water allotment) based on average data from this irrigation district [60]. The difference between the two sets of figures (783 €/hectare, totaling 39,128 Euros for the whole farm area) is an estimate of the value of the annual full water allotment, i.e., the insured capital (IC).…”

Agricultural Water Allocation under Cyclical Scarcity: The Role of Priority Water Rights

“…Thus, any water supply gap affecting the irrigation sector entails relevant losses in terms of agricultural income and employment. And third, because there is consistent evidence showing that Spanish irrigators are willing to pay to reduce their exposure to droughts, taking into account the fact that there is no risk management instrument available (e.g., insurance) allowing them to cover potential losses related to water supply gaps [15].…”

Managing Water Supply and Demand to Achieve Economic and Environmental Objectives: Application of Mathematical Programming and ANFIS Models

“…This model has both the advantages of FIS and the ability to learn neural networks; therefore, it has a higher capability compared to ANNs or FIS separately (Mehta and Jain, 2009; Safavi et al, 2013; Khadr et al, 2014;Yaseen et al, 2017;Ashrafi et al, 2017). In addition, in agricultural production systems, uncertainty related to major water supply sources has a significant effect on the cropping pattern and farmers' income (Guerrero-Baena et al, 2019). In this regard, farmers may opt to produce crops with low gross profit and capital accumulation in the cropping pattern due to the growing concerns about the uncertainty of water supply.…”