Multicrop Production Decisions in Western Irrigated Agriculture: The Role of Water Price

Applying a model of the multioutput firm, econometric results are reported for irrigated production in four multistate regions of the American West. Cross-sectional microdata from the Farm and Ranch irrigation Survey and limited –dependent variable methods are used to estimate crop-choice, supply, land allocation, and water demand functions for field crops. Farm-level water demand is decomposed into the sum of crop-level water demands are further separated into an extensive margin (land allocations) and intensive margin (short-run water use). Response to water price (measured as groundwater pumping cost) occurs primarily at the extensive margin.