Efficient Distribution of Water Between Head‐Reach and Tail‐End Farms in Developing Countries

The necessity of surface water for irrigation and its increasing scarcity in developing economies motivate the need for its efficient distribution. The inequity in the distribution of surface water arises because of the relative physical locations of the farms. Head‐reach (primary) farms are close to the source, whereas tail‐end (secondary) farms are relatively farther. The lack of physical infrastructure implies that water allocated to secondary farms must pass through primary farms. Left to their individual incentives, primary farmers use more than their fair share of water by denying its release to secondary farmers. Such an inequitable sharing results in significantly suboptimal productivity of the farming community as a whole. We propose decentralized, individually rational mechanisms to achieve socially optimal distribution of surface water for a farming community under uncertainty in rainfall, choice of multiple crops, and differing risk‐bearing abilities of primary and secondary farmers. We show that the mechanisms can be efficiently computed and highlight the impact of the improved sharing of surface water. We also study the movement of the price of water with its scarcity. Ideas that can help administer the mechanisms in practice are briefly discussed.