Application of Bayesian and cost benefit risk analysis in water resources management

• Published in: Journal of hydrology (Amsterdam) 2016-03, Vol.534, p.390-396
• Main Authors: Varouchakis, E.A., Palogos, I., Karatzas, G.P.
• Format: Article
• Language: English
• Subjects: Bayes risk; Cost benefit; Cost benefit analysis; Decision making; Fluid dynamics; Fluid flow; Freshwater; Groundwater; Hydraulics; Hydrology; Risk analysis; Water resources management
• ISSN: 0022-1694; 1879-2707
• DOI: 10.1016/j.jhydrol.2016.01.007

•This work deals with decision making in water resources management applications.•The application of cost-benefit and Bayesian decision analysis is presented.•The dilemma to build a water reservoir vs fines for overpumping actions is examined.•Probability uncertainty is the driving issue that determines the optimal decision.•Different optimal decisions may apply depending on the unknown probability handling. Decision making is a significant tool in water resources management applications. This technical note approaches a decision dilemma that has not yet been considered for the water resources management of a watershed. A common cost-benefit analysis approach, which is novel in the risk analysis of hydrologic/hydraulic applications, and a Bayesian decision analysis are applied to aid the decision making on whether or not to construct a water reservoir for irrigation purposes. The alternative option examined is a scaled parabolic fine variation in terms of over-pumping violations in contrast to common practices that usually consider short-term fines. The methodological steps are analytically presented associated with originally developed code. Such an application, and in such detail, represents new feedback. The results indicate that the probability uncertainty is the driving issue that determines the optimal decision with each methodology, and depending on the unknown probability handling, each methodology may lead to a different optimal decision. Thus, the proposed tool can help decision makers to examine and compare different scenarios using two different approaches before making a decision considering the cost of a hydrologic/hydraulic project and the varied economic charges that water table limit violations can cause inside an audit interval. In contrast to practices that assess the effect of each proposed action separately considering only current knowledge of the examined issue, this tool aids decision making by considering prior information and the sampling distribution of future successful audits.