Drainage, groundwater withdrawals and altered irrigation practices are among the techniques for reducing waterlogging problems resulting from inefficient water use. However, these corrective measures are often not adopted since the private costs incurred by the individual operator quite often exceed the private benefits. Net social benefits are likely to be positive, so collective action may be appropriate. The overall objective of this paper is to develop an integrated approach combining both economic and physical considerations in order to evaluate possible collective alternative approaches to relieving waterlogging problems. Using survey data from the San Luis Valley, this paper presents a recursive linear programming model that includes both uncertainty and capital constraints. This model incorporates a weekly short-run water allocation model and a simplified water balance model of the groundwater to form a complete simulation model. The model was run using 20 years of historical climatological data to represent the long-run effects of policies which might be undertaken by the water users or by the Colorado State Engineer. Policy alternatives modeled include: investment in canal lining, total conversion to sprinkler irrigation, various restrictions on groundwater pumpage, and a modified quota-market system. A comparison of the economic and physical results of these simulated alternatives is made and policy recommendations are suggested