Incorporating Uncertainty in the Economic Evaluation of Capital Investments for Water-Use Efficiency Improvements

David Adamson and Adam Loch

Land Economics, 2021, vol. 97, issue 3, 655-671

Abstract: Long-run investments in water-use efficiency (WUE) are risky, particularly where water is required as a secure input. State-of-nature representations of supply outcomes provide an increased understanding of the vulnerability of capital and water users to adverse events. Using Californian data, we couple cost-benefit analysis to a state-contingent analysis approach to explore the riskiness of WUE investment payoffs and cash-flow outcomes when frequencies of states of nature change over the investment course. Critically, this allows us to represent decision-maker adaptation in the face of risk and uncertainty and the role of subsidy policy in those decisions.

JEL-codes: D61 D81 (search for similar items in EconPapers)
Date: 2021
Note: DOI: 10.3368/wple.97.3.100119-0143R
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:uwp:landec:v:97:y:2021:i:3:p:655-671

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