All decisions were modeled using a simple farm model that assumed farmers act to maximize gross margin each year, given constraints on land and water available to them in the year. This model is a modified version of a decision model for the Cox's Creek catchment developed by Letcher (2002) and also reported in Letcher et al. (2004). Total farm gross margin was analyzed for all catchments, pumping thresholds, and forecast methods using four possible decision methods:
- 1. Seasonal forecast decision. The decision is made assuming that the 20th and 50th percentile exceedance probability forecasts (using SOI, FLOW, and SOI+FLOW) for the number of pumping days are correct.
- 2. Naive decision. The decision is made assuming that the number of pumping days this year is equal to the number of pumping days observed last year.
- 3. Average climate decision. The decision is made assuming that the number of days for which pumping is possible in each year is the same and equal to the average number of days pumping is permitted over the entire 86-year period.
- 4. Perfect knowledge decision. The decision is made with full knowledge of the actual number of days on which pumping is possible in each year. This is essentially used to standardize the results, because it is a measure of the greatest gross margin possible in each year, given resource constraints.
The same simple farm model is used in all cases. This model allows the farm to choose among three cropping regimes—irrigated cotton with winter wheat rotation, dryland sorghum and winter wheat rotation, and dryland cotton and winter wheat rotation. Production costs are incurred on crop planting, so areas planted for which insufficient water is available over the year generate a loss. For such crops, it is assumed that the area irrigated is cut back and a dryland yield is achieved on the remaining area planted.