A VCG Mechanism for Demand Management of Irrigation Systems

Abstract

Global climate change has induced changes in snow covers and precipitation patterns leading to unreliable availability of surface water for agricultural usage. Moreover, the increasing population has put additional strains on precious freshwater resources such as groundwater, leading to unsustainable practices of agriculture. Many studies suggest that demand based surface water management instead of supply based management may greatly mitigate the problem of supply-side fluctuations. Moreover, the rigidity of supply-based distribution rosters and fixed tariffs may be overcome using flexible pricing schemes. In this work, we propose a demand-driven allocation scheme for irrigation canal water enabled by the use of precision sensor technologies. The allocation is coupled with an auction based pricing mechanism. In the proposed approach, the demand can be met using surface water from an irrigation canal network, which is regulated by a principal agent such as a regulatory authority. In the face of shortage, the farmers resort to expensive pumping of non-renewable groundwater to meet their demand. A cropping season is divided into equal slots of fixed duration. At the beginning of each time slot, the principal-agent solicits the valuations of the farmers and sorts the bids received from the players in decreasing order and starts fulfilling the demands from the top. The principal agent uses Vickrey Clarke Groves (VCG) mechanism to compute the payments. The VCG mechanism for payments ensures user truthfulness. Our simulation results demonstrate that under certain realistic assumptions, this mechanism can increase profitability by reducing costs, help decrease groundwater pumping and conserve the surface water.