Multicriteria analysis of derived water demand functions: a Spanish case study

Irrigated agriculture has been analysed in Spain in recent years because of its high water consumption and its apparent ineciency. Several possibilities for water policy have been debated, in particular the pricing of irrigation water. This paper aims to contribute to this discussion by simulating the impact that a policy based upon the price of water could have on agricultural production, analysing the economic, social and environmental implications of such a water policy. This research introduces a methodology for deriving water-demand functions in contexts in which farmers' behaviour is not explained by the maximisation of gross margin but by a utility function with several con ̄icting criteria. This methodology utilises a weighted-goal programming approach to estimate a surrogate utility function for the farmer's decision process; this in turn is used to estimate the value of water demand in irrigated crop production using utility-derived demand functions. The empirical results of this study stress that water pricing as a single instrument for controlling water use is not a satisfactory tool for signi®cantly reducing water consumption in agriculture. The reason for this is that consumption is not reduced signi®cantly until prices reach such a level that farm income and agricultural employment are negatively a€ected. The results also show that the estimated water-demand curve is di€erent when a multicriteria utility function rather than the classical pro®t maximisation hypothesis is employed. # 2000 Elsevier Science Ltd. All rights reserved.