Modeling participation willingness and contract optimization of agricultural water rights options under hydrological uncertainty

Agricultural water rights options, as flexible market‑based instruments, are increasingly adopted to cope with water scarcity and supply uncertainty. Nevertheless, systematic research on arid‑region irrigation districts’ willingness to participate in option trading and optimal contract parameter design remains limited. This study establishes a multi‑layer coupled modeling framework integrating bi‑objective optimization for cropping revenue and water use, stochastic profit‑loss decomposition of option‑spot trading, cumulative prospect theory‑based measurement of participation willingness, and a dynamic trust‑correction mechanism driven by rolling forecast errors. Empirical simulations are conducted for Linhe District in the Hetao Irrigation District over the period 2016–2025. The results show that ( i ) engineering‑driven technical water savings constitute the main source of tradable water rights, whereas cropping pattern adjustment alone cannot yield reliable ones; ( ii ) water‑saving practices and option contracts bring positive additive benefits to irrigation districts; ( iii ) irrigation districts maintain stable preferences for option contracts across the simulation years, yet their participation willingness fluctuates substantially due to historical forecast errors; ( iv ) under the specific parameterization in 2024, the break‑even contract volume reaches 7.8 × 10 6 m 3 with a break‑even strike price of 0.98 CNY/m 3 . These findings support the deployment of water rights options with water‑saving measures in arid irrigation districts and inform differentiated operational strategy design.