A Bioeconomic Simulation Analysis of Regulating Groundwater Irrigation

This study develops a firm‐level bioeconomic simulation model capable of stochastically determining yields for the major dryland and irrigated crops in the central basin of the Ogallala Formation as a function of soil moisture and atmospheric stress during critical stages of plant development. The model is used to evaluate three methods of regulating groundwater irrigation—no restriction, a quantity limitation, and a graduated tax per unit above the quantity limitation. Results differ for poor and adequate water situations but indicate the potential value of an educational program on timing of irrigation application to maximize net farm income.