A Leader-Follower Framework for Sustainable Water Pricing and Allocation

This paper presents a new leader-follower decision-making framework for the automatic assessment and comparison of different water resources management scenarios and selection of the best one. WEAP (Water Evaluation and Planning) model is used to simulate different management scenarios, which are reasonable from the viewpoint of the leader decision-maker, and evaluate the response of water users (followers). A number of management scenarios are developed for water pricing and allocation to followers in the agricultural, industrial, and fishery sectors. The results are evaluated by a novel sustainability index considering economic performance, water allocation efficiency, and social equity criteria. The economic performance is evaluated by two indices assessing the profit of the basin’s leader and followers. The efficiency of water allocation policies is analyzed by an index using the Evidential Reasoning approach. Social equity is inspected by an index evaluating the distribution of incomes among followers using the Gini coefficient concept. The Gorganrud-Qaresou basin in Iran is used as a case study to demonstrate the applicability and efficiency of the proposed framework and the sustainability index. Sustainable water allocation policies and water prices for agricultural, industrial, and fishery sectors in the basin are the main findings of this paper. The results show that current water tariffs are low, particularly for the agricultural sector, and it could lead to inefficient use of water by followers, which has been the case in many regions in Iran.