Valuing Water Supply Reliability with Sensitivity Analysis
Prepared for Presentation at the Southern Agricultural Economics Association’s 2017 Annual Meeting, Mobile, AL, February 4-7, 2017
19 Pages Posted: 15 Mar 2017
Date Written: January 18, 2017
The purpose of this paper is to calculate the expected reliability benefits of alternative water supplies that are less vulnerable to disruption than the current composition of supplies, especially those regions which rely on imported surface water. Expected reliability benefits are measured using estimates of welfare losses under various levels of supply disruption, the probability of each level disruption, and on consumption forecasts over the life of proposed alternative supplies. To consider uncertainty in reliability benefits, we run sensitivity analyses to value reliability under different discount rates, the elasticities of demand, water supply disruption levels, and corresponding probability distributions of disruption.
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