Equilibrium Programming for Improved Management of Water-Resource Systems

Abstract

Effective water-resources management requires the joint consideration of multiple decision-makers as well as the physical flow of water in both built and natural environments. Traditionally, game-theory models were developed to explain the interactions of water decision-makers such as states, cities, industries, and regulators. These models account for socio-economic factors such as water supply and demand. However, they often lack insight into how water or pollution should be physically managed with respect to overland flow, streams, reservoirs, and infrastructure. Conversely, optimization-based models have accounted for these physical features but usually assume a single decision-maker who acts as a central planner.

Equilibrium programming, which was developed in the field of operations research, provides a solution to this modeling dilemma. First, it can incorporate the optimization problems of multiple decision-makers into a single model. Second, the socio-economic interactions of these decision-makers can be modeled as well such as a market for balancing water supply and demand. Equilibrium programming has been widely applied to energy problems, but a few recent works have begun to explore applications in water-resource systems. These works model water-allocation markets subject to the flow of water supply from upstream to downstream as well as the nexus of water-quality management with energy markets.

This dissertation applies equilibrium programming to a broader set of physical characteristics and socio-economic interactions than these recent works. Chapter 2 also focuses on the flow of water from upstream to downstream but incorporates markets for water recycling and reuse. Chapter 3 also focuses on water-quality management but uses a credit market to implement water-pollution regulations in a globally optimal manner. Chapter 4 explores alternative conceptions for socio-economic interactions beyond market-based approaches. Specifically, social learning is modeled as a means to lower the cost of water-treatment technologies.

This dissertation's research contributions are significant to both the operations research community and the water-resources community. For the operations research community, this dissertation could serve as model archetypes for future research into equilibrium programming and water-resource systems. For instance, Chapter 1 organizes the research in this dissertation in terms of three themes: stream, land, and sea. For the water-resources community, this dissertation could make equilibrium programming more relevant in practice. Chapter 2 applies equilibrium programming to the Duck River Watershed (Tennessee, USA), and Chapter 3 applies it to the Anacostia River Watershed (Washington DC and Maryland, USA). The results also reinforce the importance of the relationships between socio-economic interactions and physical features in water resource systems. However, the risk aversion of the players acts as an important mediating role in the significance of these relationships. Future research could investigate mechanisms for the emergence of altruistic decision-making to improve equity among the players in water-resource systems.