Is water trading policy an effective solution for water allocation in Voshmgir dam? Parinaz Jansouz a, *, Javad Shahraki a and Mohammad Abdolhosseini b a Faculty of Management and Economics, Department of Agricultural Economics, University of Sistan and Baluchestan, P.O. Box: 98135-987, Zahedan, Iran *Corresponding author. E-mail: p.jansouz@gmail.com b Faculty of Water and Soil Engineering, Department of Water Engineering, Gorgan University of Agricultural Sciences and Natural Resources, P.C: 49189-43464, Gorgan, Iran Abstract The aim of this study is to assess the effectiveness of water trading policy as a solution for optimal use of water between farmers in Voshmgir dam, Iran. For assessment, four villages were selected and two water allocation pro- grams under non-trading and trading systems were designed by two-stage stochastic programming technique and uncertainties expressed as intervals and probability distributions. The results obtained from the two programs were compared based on water volume which is released through trading and decrease in water deficiency as effective- ness indices. The results show that the water allocation under trading policy has changed so that it has led to released water and decrease in water deficiency by keeping the agricultural profit under non-trading, but irrigated area is decreased under trading. Generally, trading policy can lead to more effective allocation from the view of released water and decrease in water deficiency, but it can remove some farmers from agricultural activities by decreasing the irrigated area. As a result, trading policy can be effective in the short term especially in drought conditions due to insufficient water supply and can be unnecessary in normal and wet years in this case study. Keywords: Interval parameter; Stochastic programming; Trading; Uncertainty; Voshmgir dam Introduction Water trading policy in agriculture is known as a new market-based strategy for water resources man- agement especially in drought conditions (Dosi & Easter, 2000). This strategy includes a set of goals, which lead to the increase of productivity, improvement of conservation, and more sustainable appli- cation of water resources. Considering the fact that agriculture is the major user of water, any increase in water productivity could significantly prevent the waste of this important input (Droitsch & Robinson, 2009). The concept of water trading is necessary because of its impact on the management Water Policy 19 (2017) 1119–1142 doi: 10.2166/wp.2017.121 © IWA Publishing 2017 Downloaded from https://iwaponline.com/wp/article-pdf/19/6/1119/203957/019061119.pdf by guest on 31 May 2020