Designing Water Transfer System

Abstract

Water transfer has not been commonly used to reduce drought risk because it is difficult to resolve the conflict among the water users. This study focuses that this conflict can be resolved by introducing the incentive mechanism to transfer water. Specifically, we design the contract over the water transfer by use of game theory and dynamic programming. Under this contract, we show that water users contract so as to minimize the total expected discount cost from now to infinite horizon. Numerical examples show that the number of the drought can be decreased when water users obey the optimal contract policy.