Water Demand Elasticities Under Risk Conditions

Purpose - The purpose of this paper is twofold: first, to estimate the water demand elasticities using a parametric linear programming (LP) model to provide an insight into the accurate and flexible pricing policy of irrigation water in the Jordan Valley; and second, to highlight key risk aspects, related to water demand, which are likely to impact the community.Design/methodology/approach - A parametric LP model was used in this research. Primary and secondary data were collected.Findings - Results revealed that the demand elasticity is high in Spring and Summer than in Fall and Winter, meaning that during Spring and Summer farmers are willing to forgo larger amounts of water than in other months. This is because of areas planted during Spring seasons are much less than those of Autumn and Winter.Practical implications - The Jordan Valley suffers from water scarcity risk, and consequently the area to be planted is not fully utilized, leading to lower cropping intensities. Responsible authorities in Jordan need to address these issues and propose proper solutions in order to reduce further escalation of this risk and subsequent impact on local communities. Insight into the value of water demand elasticities is essential to support and mitigate policy decision making under risk conditions, concerning investments in water supply systems; investments in the water distribution and irrigation systems; efficient allocation of water with competing sectors; setting water pricing and tariffs; setting cost recovery mechanisms, and the risks encountered under lack of mitigated policy decision making.Originality/value - This is one of few studies that addresses in detail using a parametric LP model the issue of water scarcity, related risks and subsequent impact on society in Jordan. It is expected to help policy and decision makers better formulate future estimates and demand which subsequently reduce related risks.