RT Journal Article
SR Electronic
T1 Incorporating Uncertainty in the Economic Evaluation of Capital Investments for Water-Use Efficiency Improvements
JF Land Economics
JO Land Econ
FD University of Wisconsin Press
SP 655
OP 671
DO 10.3368/le.97.3.655
VO 97
IS 3
A1 Adamson, David
A1 Loch, Adam
YR 2021
UL http://le.uwpress.org/content/97/3/655.abstract
AB 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.