An inexact risk management model for agricultural land-use planning under water shortage

Abstract

Water resources availability has a significant impact on agricultural land-use planning, especially in a water shortage area such as North China. The random nature of available water resources and other uncertainties in an agricultural system present risk for land-use planning and may lead to undesirable decisions or potential economic loss. In this study, an inexact risk management model (IRM) was developed for supporting agricultural land-use planning and risk analysis under water shortage. The IRM model was formulated through incorporating a conditional value-at-risk (CVaR) constraint into an inexact two-stage stochastic programming (ITSP) framework, and could be used to control uncertainties expressed as not only probability distributions but also as discrete intervals. The measure of risk about the second-stage penalty cost was incorporated into the model so that the trade-off between system benefit and extreme expected loss could be analyzed. The developed model was applied to a case study in the Zhangweinan River Basin, a typical agricultural region facing serious water shortage in North China. Solutions of the IRM model showed that the obtained first-stage land-use target values could be used to reflect decision-makers’ opinions on the long-term development plan. The confidence level α and maximum acceptable risk loss β could be used to reflect decision-makers’ preference towards system benefit and risk control. The results indicated that the IRM model was useful for reflecting the decision-makers’ attitudes toward risk aversion and could help seek cost-effective agricultural land-use planning strategies under complex uncertainties.

Keywords

agricultural land-use planning / risk management / CVaR / uncertainty / water shortage

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