Pareto Optimization for Alleviating Water Conflicts Between Urban and Agriculture Sectors Subject to Water Rights

A quantitative management model, which allows for an assessment of water allocation between agricultural and municipal needs based on water rights and demand, is proposed. The model is based on a pareto optimization procedure that can be shared between the municipal and agriculture sectors. The model
refers to the water rights of the sectors, just as one would refer to an investment portfolio. The investing sector receives more utility from the right to larger amounts of water and suffers from uncertainties associated with water supply. The model is based on the work of Markowitz (1952), which constructs a risk-diversified investment portfolio by building an Optimal Pareto (OP) combination for the rights of the two main sectors. Subsequently, a simulation model was run and utilized to evaluate an optimal solution, including a sensitivity analysis. The simulations showed that the likelihood of demonstrating combined rights could serve as a Pareto Optimization as long as the solution increased as follows: (i) the distress of the water economy increased (i.e., the larger the municipal demand, the larger is the proportion of the expected groundwater recharge); (ii) the water capacity of the reservoir decreased, and; (iii) the risk aversion of the two sectors increased.