The Economics of Deficit Irrigation

Natural resource economists have paid great attention to irrigation water allocations among competing users. However, the intrauser allocation problem is greatly understudied. As irrigation becomes increasingly capital‐intensive, inefficient within‐field allocation and ill‐designed water‐conservation policy can bring considerable value loss to the water resource. We offer a comprehensive treatment of the economic problem of the intrauser allocation of a limited amount of irrigation water. A framework is provided for determining optimal irrigation intensity and extensity in both static and dynamic settings. An empirical application in West Texas cotton production demonstrates model implementation and offers new insights into the water‐saving potential of government‐sponsored cost‐share programs for promoting high‐efficiency irrigation adoption.