Least-cost allocation and valuation model for water resources

A mathematical economic model of water use and water quality is formulated that allows for trade‐offs between the technologies of water use and waste treatment and the capacities of different regions for waste assimilation. The input‐output coefficients of water‐using production processes are written as functions of intake water quality so that the feedback effects of waste discharge on the economic process itself may be evaluated. The model determines the combination of production processes in each region that minimizes the overall cost of meeting a given bill of final demands, including demands for water quality (i.e., water quality standards). Such a model could be used to evaluate water development projects on a consistent basis; in particular it would calculate the marginal values of water in different regions and the marginal costs of meeting different water quality objectives.