Reply [to “Comment on ‘A reevaluation of price elasticities for irrigation water’ by Richard E. Howitt, William D. Watson, and Richard M. Adams”]

TL;DR: In this paper, it was shown that omission of the elasticity of demand for the crop produced leads to an inelastic bias in the demand for irrigated water, and the difference between the resulting estimates are empirically demonstrated for regional derived demand functions estimated from a model of California's agricultural industry.

Abstract: Some of the impacts of energy cost increases and reduced supplies on the product mix of annual field crops and vegetables in California are analyzed. A quadratic programming model including risk is used to evaluate the effects of increased energy costs and reductions in fertilizer and in fuel supplies. The model includes a demand matrix of some nine field crops and twenty-eight seasonal vegetables. The study also considers the relative impact of energy changes on producer and consumer welfare. Results suggest continued viability of vegetable production but differential consumer and producer impacts associated with energy changes.