Quantifying the economic importance of irrigation water reuse in a Chilean watershed using an integrated agent-based model

Irrigation with surface water enables Chilean agricultural producers to generate one of the country's most important economic exports. The Chilean water code established tradable water rights as a mechanism to allocate water amongst farmers and other water-use sectors. It remains contested whether this mechanism is effective and many authors have raised equity concerns regarding its impact on water users. For example, speculative hoarding of water rights in expectations of their increasing value has been described. This paper demonstrates how farmers can hoard water rights as a risk management strategy for variable water supply, for example, due to the cycles of El Niño or as consequence of climate change. While farmers with insufficient water rights can rely on unclaimed water during conditions of normal water availability, drought years overproportionally impact on their supply of irrigation water and thereby farm profitability. This study uses a simulation model that consists of a hydrological balance model component and a multiagent farm decision and production component. Both model components are parameterized with empirical data, while uncertain parameters are calibrated. The study demonstrates a thorough quantification of parameter uncertainty, using global sensitivity analysis and multiple behavioral parameter scenarios.