A methodological perspective on valuing water: a comparison between linear programming and stochastic dynamic programming

Information on the value of water in use is a prerequisite for the efficient allocation, utilization, trading and transfer thereof. These issues are becoming very important for South Africa. Linear programming (LP) and stochastic dynamic programming (SDP) are two techniques that can be applied to value water. Based on a simulated irrigation farming situation downstream of the Vanderkloof Dam wherein farmers hold a capacity share (CS) this paper draws a comparison between the marginal value products (MVP’s) obtained from applying LP and SDP simultaneously. Linear programming is used to optimize water use on the farm during the immediate season while SDP is used to optimize the use of water in storage in the farmers capacity share (CS) in the Vanderkloof Dam through time. Emphasis is placed on the interpretation of the results which are presented graphically