The farmer’s irrigation technology choice problem is as follows:
The search for a maximum consists of two stages. First, the optimal amount of applied water (a continuous choice) is determined conditional on each technology. Then, working backwards, the highest-profit technology is identified.
The applied input choice is determined by the following:
The Future Operating Capability (FOC) is
In words, this optimization condition implies that the Value of the Marginal Product (VMP) of effective water must equal the marginal price of effective water. Once the second-stage, continuous problem is solved, the discrete choice problem of technology selection must be addressed, choosing
The model generates a number of testable hypotheses about the influence of environmental and market conditions on adoption of precision technology. Con-
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The Economics of Agricultural Water Use and the Role of Prices--David Sunding ."
Water Conservation, Reuse, and Recycling: Proceedings of an Iranian-American Workshop . Washington, DC: The National Academies Press,
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