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\hypersetup{pdftitle={Simulating Water Market Based on Payment for Ecosystem Services: an Optimal Dynamic Water Flow Model},pdfauthor={Xialin Wang, Ernst-August Nuppenau},pdfsubject={Tropentag 2016: Abstract},pdfkeywords={Dynamic control, land-uses, Okavango river basin, optimal water extraction, payment for ecosystem services, shadow price of water, water policy },pdfpagemode=None,colorlinks=true}
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\parbox[b]{13.4cm}{\centering \large{\textbf{Tropentag, September 18-21, 2016, Vienna, Austria}}\\[1ex] \Large{``Solidarity in a competing world ---\\fair use of resources''\\[2ex]}}
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\Large{\textbf{Simulating Water Market Based on Payment for Ecosystem Services: an Optimal Dynamic Water Flow Model\footnote{\textbf{Contact Address:} Xialin Wang, Justus-liebig University Giessen, Institute of Agricultural Policy and Market Research, Senckenbergstrasse 3, 35390~Giessen, Germany, \mbox{e-mail}: \email{xialin.wang@agrar.uni-giessen.de}}\\[0.8ex]}}
\normalsize{\textsc{Xialin Wang$^{1}$, Ernst-August Nuppenau$^{2}$}}
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\begin{itemize*}
\item[]{\small{\textit{$^{1}$Justus-liebig University Giessen, Institute of Agricultural Policy and Market Research, Germany}}}
\item[]{\small{\textit{$^{2}$Justus-Liebig University Giessen, Institute of Agricultural Policy and Market Research, Germany}}}
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\index[author]{Wang, Xialin}
\index[author]{Nuppenau, Ernst-August}
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\textbf{Abstract}
\begin{abstract}
\normalsize{
Water extraction is a key factor leading to water shortage and land degradation problems. As gainer of ecosystem services over the basin, households share benefits of flowing water through various production activities with regards to land"=uses. Due to water resources management rarely making full use of price policy, the conflict of water extraction, especially in dry season, is aggregating between upstream holders and downstream community. Considering into dynamic process of water flowing, and moreover, the heterogeneity of land"=use at targeted sites, we present a dynamic theoretical model over space that is based on the mechanism of payment to endogenously derive shadow price of water which represents the marginal utility of releasing constraint equivalently to how much household would be compensated by giving up an extra unit of water on the basis of guaranteed water consumption and land"=use revenue. For this purpose, the scope of our approach is defined as economically to minimise total outcome loss of upstream holders through modifying their land"=use distribution to maintain water flow on the one hand, while ecologically to determine the maximal aggregate runoff for downstream community on the other hand. In doing so, first, we cooperate with hydrology data to opt for a detailed spatial representation of the basin where land"=use retention and water flow interaction are demonstrated by redesign of water allocation at site specifically. Second, we formulate empirical water demand associated with economic outputs delivering from four land uses, which is established as private objective function of single household to evaluate maximal profit with the amount of water demand under constraint of water endowment. Third, we compute dynamic control in final objective owing to reducing water extraction, which minimises aggregate profit loss over all smallholders, and simultaneously returns to optimal value of extraction and water residue at each site. Furthermore, by pricing of water, it possibly allows us to calibrate percentage change of each land"=use at site and over space. The results indicate that institution of payment for water could have large effects on quantities of seasonal water runoff as well as have reformed land"=use into more sustainable structure over the basin.  }

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\noindent \textbf{Keywords:} Dynamic control, land"=uses, Okavango river basin, optimal water extraction, payment for ecosystem services, shadow price of water, water policy 
\index[key]{Dynamic control}
\index[key]{Land"=uses}
\index[key]{Okavango river basin}
\index[key]{Optimal water extraction}
\index[key]{Payment for ecosystem services}
\index[key]{Shadow price of water}
\index[key]{Water!policy }
\end{document}
