Abstract
To reduce the drought risk, it is promising measure to transfer the water from those who have sufficient surplus water to the water users who lack water. However, it is not used very much in Japan because it may not encourage the users to transfer due to no economical merit and so on. In this paper, water transfer contract is designed in order to give the water users the incentives to do so. In addition, we develop the model to guide the users to contract rationally so as to minimize the total expected discounted cost. We show that the water transfer system can be effective to reduce drought risk.
