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Capacity Choice of Dams under Rivalry Use and Externalities

Author

Listed:
  • Harold Houba

    (VU University Amsterdam, the Netherlands)

  • Kim Hang Pham Do

    (Massey University, New Zealand)

  • Xueqin Zhu

    (Wageningen University, the Netherlands)

Abstract

This paper studies the relation between optimal dam capacity and water management under rivalry uses and externalities. We extend the hydropower generation model, based on Haddad (2011), by including the competing use of water resource, non-linear building cost of dam capacity and externalities in a welfare optimization model. We obtain the optimal dam capacity for multi-functional dams such as providing infrastructure for industrial and households water use, conjunctive use of hydropower generation and irrigation; storing water in the wet season for use in the dry season, and mitigating flooding damages. The optimal solution shows that optimal dam capacity is characterized by the marginal benefits of hydropower generation, the marginal costs of flooding damages, and the constraining factors. Moreover, the optimal water management can be achieved by using derived sea sonal prices in a decentralized manner.

Suggested Citation

  • Harold Houba & Kim Hang Pham Do & Xueqin Zhu, 2014. "Capacity Choice of Dams under Rivalry Use and Externalities," Tinbergen Institute Discussion Papers 14-143/II, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20140143
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    References listed on IDEAS

    as
    1. Xueqin Zhu & Ekko Ierland, 2012. "Economic Modelling for Water Quantity and Quality Management: A Welfare Program Approach," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(9), pages 2491-2511, July.
    2. Houba, Harold & Pham Do, Kim Hang & Zhu, Xueqin, 2013. "Saving a river: a joint management approach to the Mekong River Basin," Environment and Development Economics, Cambridge University Press, vol. 18(1), pages 93-109, February.
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    Cited by:

    1. Xie, Yang & Zilberman, David, 2015. "Water-Storage Capacities versus Water-Use Efficiency: Substitutes or Complements?," 2015 Conference, August 9-14, 2015, Milan, Italy 211894, International Association of Agricultural Economists.
    2. Kemeze, Francis H. & Miranda, Mario J. & Kuwornu, John & Amin-Somuah, Henry, 2016. "Optimal Management of Runoff Reservoir Supply: The Case of Tono Reservoir in Northern Ghana," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236030, Agricultural and Applied Economics Association.

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    More about this item

    Keywords

    OR in environment and climate change; river-basin management; dam capacity; welfare optimization; externalities;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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