In this study, economic implications of allocating surface water with the existing policy (seniority rule) and three other alternative (People First, proportional reduction, and trading) policies are investigated to address potential water scarcities in the Bow River Sub Basin (BRSB) of Southern Alberta using a mathematical programming model. The model used an improved calibration technique and 2008 data for three irrigation and three non-irrigation sector users in the BRSB. Results indicate that while the seniority rule favours senior license holding irrigation users and the People First policy favors municipal sector users, irrigation users are better off with the proportional allocation policy even though it affects all users across-the-board. Moreover, if the users can participate in a costless trade, then non-irrigation users tend to buy water as they place high value of water at the margin. Some irrigation users find selling water more profitable than utilizing their allocations for crop production.


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