Assessing farmers' decisions toinvest in two water-saving irrigation methods using stochastic dynamicprogramming

Farmers' decisions on whether to invest in a drip or sprinkler irrigation system are examined using an optimization method in response to weather uncertainties. This was done by looking at the production of five common crops grown on two types of soil and under three different policy scenarios: no policies applied, a water pricing system where farmers pay per millimetre of water used, and a subsidization scheme that reimburses farmers for the capital costs of irrigation equipment. Findings reveal that drip irrigation (DI) is not a financially viable investment option for any soil type and for any crop grown on it in the absence of any applied policies as well as in the presence of alternative water pricing levels. Furthermore, for the pricing system policy scenario, farmers growing certain crops on both soil types decided either to delay the installation of sprinkler irrigation (SI) or not use it all. In addition, the applied subsidies on the capital cost of irrigation equipment significantly influence the farmer's investment decision to switch to SI earlier than in the absence of such policies, but also, depending on the soil and crop type and the level of subsidies, to switch from SI to DI.