Author(s)

Zhichao Gao¹, Hong Zhang², Minghu Ha¹

¹School of Management, Hebei University, Baoding, China.
²School of Science, Hebei University of Engineering, Handan, China.

Optimization of water resource management is very important to reduce water shortage risk and increase economic benefit. Water option can be used as a flexible instrument in water resource management. In this study, chooser options are designed for water managers to buy additional water in drought periods and sell redundant water in wet periods. To make optimal decisions under uncertainties including probability distributions and intervals, an inexact two-stage mixed-integer programming (ITSMIP) model is applied. To illustrate the role of chooser options in water resource management, a case study is presented. Factors which influence the willingness of buying the chooser options are analyzed and the optimal water allocation plans are also provided. The results demonstrate that chooser options can help water managers mitigate the impact of water shortage and increase utilization efficiency of water resource greatly.

Inexact Optimization, Two-Stage Programming, Chooser Option, Water Allocation

Gao, Z. , Zhang, H. and Ha, M. (2018) Optimization of Water Resource Management Using Chooser Option Contracts under Uncertainty. American Journal of Industrial and Business Management, 8, 1308-1326. doi: 10.4236/ajibm.2018.85089.