Determining an estimate of the elasticity of derived demand for
irrigation water is a crucial step in analyzing water policy alternatives for
most regions in the West. Previous research indicates that water usage in
western agricultural regions is relatively insensitive to changes in water
prices. More recently these findings have been challenged on the basis that
the modeling approaches that have been employed provide results that are
biased toward inelasticity. This paper analyzes the implications of
assumptions commonly used in regional models and identifies sources of
potential bias. The significance for empirical research is discussed.
