An Economic Framework for Sharing Water Within a River Catchment

Abstract

A framework for sharing a limited quantity, but also a variable quantity, of water between irrigation and the environment to maximize social wellbeing is developed and illustrated. The optimal water allocation equates the marginal social value of water across different uses. A simplified illustration allocates water from the Goulburn River in northern Victoria, Australia, between environmental water to increase numbers of Golden Perch (GP) fish stocks and irrigation demand for water for dairy farmers. The value of water for GP is developed using a combination of fish numbers as an ecological response function of water and Choice Model estimates of willingness to pay by Victorian households f..