MCDM farm system analysis for public management of irrigated agriculture

In this paper we present a methodology within the multi-criteria paradigm to assist policy decision-making on water management for irrigation. In order to predict farmers’ response to policy changes a separate multi-attribute utility function for each homogeneous group, attained applying cluster analysis, is elicited. The results of several empirical applications of this methodology suggest an improvement of the ability to simulate farmers’ decision-making process compared to other approaches. Once the utility functions are obtained the policy maker can evaluate the differential impacts on each cluster and the overall impacts in the area of study (i.e. a river basin) by aggregation. On the empirical side, the authors present some studies for different policy instruments including water pricing, water markets, modernization of irrigation systems and a combination of them. JEL Classification: Q25, Q15, C61.