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An Empirical Study for Real Options of Water Management in the Three Gorges Reservoir Area

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  • Zuliang Lu

    (Laboratory for Nonlinear Science and System Structure, Chongqing Three Gorges University, Chongqing 404000, China
    Research Center for Mathematics and Economics, Tianjin University of Finance and Economics, Tianjin 300222, China)

  • Xiankui Wu

    (Laboratory for Nonlinear Science and System Structure, Chongqing Three Gorges University, Chongqing 404000, China)

  • Fei Cai

    (Laboratory for Nonlinear Science and System Structure, Chongqing Three Gorges University, Chongqing 404000, China)

  • Fei Huang

    (Laboratory for Nonlinear Science and System Structure, Chongqing Three Gorges University, Chongqing 404000, China)

Abstract

This paper investigates an empirical evaluation of water management on agricultural irrigation. To address this problem, a real options model was proposed. This model analysis the choice of investment in water savings. Also, the model discusses a linear complementary problem that can be transformed into the inequalities of parabolic variational. By using a power penalty method, we solved the parabolic variational inequalities. The results depicted that the nonlinear parabolic equations’ solution is converges to the rate of order O ( h − k 2 ) . A numerical example is given at the end of the paper to demonstrate the theoretical analysis follows from the Three Gorges Reservoir Area.

Suggested Citation

  • Zuliang Lu & Xiankui Wu & Fei Cai & Fei Huang, 2021. "An Empirical Study for Real Options of Water Management in the Three Gorges Reservoir Area," Sustainability, MDPI, vol. 13(20), pages 1-16, October.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:20:p:11255-:d:654578
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    References listed on IDEAS

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    2. Chorn, L.G. & Shokhor, S., 2006. "Real options for risk management in petroleum development investments," Energy Economics, Elsevier, vol. 28(4), pages 489-505, July.
    3. Janis M. Carey & David Zilberman, 2002. "A Model of Investment under Uncertainty: Modern Irrigation Technology and Emerging Markets in Water," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 171-183.
    4. Anastasios Michailidis & Konstadinos Mattas & Irene Tzouramani & Diamantis Karamouzis, 2009. "A Socioeconomic Valuation of an Irrigation System Project Based on Real Option Analysis Approach," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 23(10), pages 1989-2001, August.
    5. Siyue Sun & Guolin Zhang & Tieguang He & Shufang Song & Xingbiao Chu, 2021. "Effects of Landscape Positions and Landscape Types on Soil Properties and Chlorophyll Content of Citrus in a Sloping Orchard in the Three Gorges Reservoir Area, China," Sustainability, MDPI, vol. 13(8), pages 1-14, April.
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