A Conditional Value‐at‐Risk Based Inexact Water Allocation Model

A conditional value‐at‐risk (CVaR) based inexact two‐stage stochastic programming (CITSP) model was developed in this study for supporting water resources allocation problems under uncertainty. A CITSP model was formulated through incorporating a CVaR constraint into an inexact two‐stage stochastic programming (ITSP) framework, and could be used to deal with uncertainties expressed as not only probability distributions but also discrete intervals. The measure of risks about the second‐stage penalty cost was incorporated into the model, such that the trade‐off between system economy and extreme expected loss could be analyzed. The developed model was applied to a water resources allocation problem involving a reservoir and three competing water users. The results indicated that the CITSP model performed better than the ITSP model in its capability of reflecting the economic loss from extreme events. Also, it could generate interval solutions within which the decision alternatives could be selected from a flexible decision space. Overall, the CITSP model was useful for reflecting the decision maker’s attitude toward risk aversion and could help seek cost‐effective water resources management strategies under complex uncertainties.