Resources, Conservation and Recycling 95 (2015) 156–173 Contents lists available at ScienceDirect Resources, Conservation and Recycling jo u r n al homep age: www.elsevier.com/locate/resconrec Administrative and market-based allocation mechanism for regional water resources planning Yan Tu a,b , Xiaoyang Zhou c , Jun Gang e , Merrill Liechty b , Jiuping Xu a,d,∗ , Benjamin Lev b a Business School, Sichuan University, Chengdu 610064, PR China b Decision Sciences Department, LeBow College of Business, Drexel University, Philadelphia, PA 19104, USA c International Business School, Shaanxi Normal University, Xi’an 710062, PR China d State Key Laboratory of Hydraulics and Mountain River Engineering, Sichuan University, Chengdu 610064, PR China e Sichuan Institute of Building Research, Chengdu 610064, PR China a r t i c l e i n f o Article history: Received 12 June 2014 Received in revised form 26 September 2014 Accepted 23 December 2014 Available online 20 January 2015 Keywords: Allocation of regional water resources Water rights Multi-objective bi-level optimization Uncertainty Interactive programming Particle swarm optimization a b s t r a c t The aim of this paper is to present an administrative and market-based optimization method for solving a problem of regional water resources allocation by considering a hierarchical structure under multiple uncertainties. To accomplish this, a multi-objective bi-level programming model is developed based on the water right distribution in a river basin. In this model, the stream flow (i.e., water supply) and water demand are considered as a fuzzy random variable and a random fuzzy variable, respectively. The regional authority, the leader in the hierarchy, seeks to maximize the total benefit to society while simultaneously minimizing pollution emissions. The sub-areas, the followers in the hierarchy, seek to maximize their own economic benefits. To deal with the inherent uncertainty, a transformation of variables into fuzzy variables is done, and through the expected value operation, the fuzzy variables are subsequently trans- formed into determined ones. For solving the complex non-linear bi-level programming model, a bi-level interactive method based on satisfactory solution with global–local–neighbor adaptive particle swarm optimization (GLN-aPSO) is designed as a combined solution method. A case study is presented to demon- strate the applicability and efficiency of this method. The interactive solutions associated with different minimal satisfactory degrees of the two objectives in the upper level have been generated. They can help the regional authority and the sub-areas to identify desired water allocation schemes according to their preferences and practical conditions, as well as facilitate in-depth analyses of tradeoffs between the objectives in the two levels. Finally, to verify that it is reasonable to use bi-level programming the results are compared with those of using single level programming. © 2014 Elsevier B.V. All rights reserved. 1. Introduction Water is a necessary natural resource for human life and is the basis for sustainable development. With socio-economic devel- opment and a growing population, the conflict between human society’s demands for water and its limited resources are becoming more pronounced. Due to the impact of climate change and increas- ing intensity of human activity, many areas around the world are facing increasingly severe water shortages (Vörösmarty et al., 2000; Piao et al., 2010). With insufficient water resources to meet rising demands, over-use of both surface and groundwater have led to associated ecological environmental degradation (Xia et al., 2007). ∗ Corresponding author at: Business School, Sichuan University, Chengdu 610064, PR China. Tel.: +86 028 85415122; fax: +86 028 85415143. E-mail address: xujiuping@scu.edu.cn (J. Xu). Many international organizations, including the Global Water Part- nership (GWP), the International Network of Basin Organizations (INBO), the European Parliament, and the International Center for Integrated Water Resource Management (ICIWaRM), have made considerable efforts to improve water resource management effi- ciency. The main cause of water crises is the lack of sustainable water resource management (UNESCO, 2006). Over the last sev- eral decades, increase in water demand has been met by the development of new water sources. However, the costs associated with technical, economic and environmental concerns make this approach unacceptable for fully meeting future growth. It is of great importance to understand the optimal allocation of water as the demand is growing but supply is not expanding to meet this growth. Thus, in an economic sense water scarcity is said to be increasing. Water is an important input into many competing activities and choices need to be made regarding when and where it should be http://dx.doi.org/10.1016/j.resconrec.2014.12.011 0921-3449/© 2014 Elsevier B.V. All rights reserved.