*2.3. Individual Responses to Water Quality Regulations*

We expect that each stakeholder within each subarea will respond to *F*, depending on the level of *F* and the conditions (cropping patterns, physical conditions such as soil properties, etc.) in that subarea. In the empirical application, we will look at the effects of surface water and irrigation land and water limits and fees, as these are the main forms of regulation that can affect salinity load in the case of a nonpoint source pollution. In future empirical applications, we propose limits on the output of the model, specifically the salinity loading. Here, we outline the full analytical model.

Given *F*, each subarea faces the following two options:


We consider the abatement in (a) and (b) to be "individual responses" to the salinity management regulation. That is, each subarea acts on its own responses, given its resources and local conditions (In the empirical application section, we also consider some of the individual responses, such as restrictions on water quotas, restrictions on cropping patterns, land fallowing, and investment in water-conserving irrigation technologies, as regulatoryimposed policies).

Each subarea is characterized by an aggregate revenue function (of all agricultural producers within each water district) minus fines on excess salt loading and minus abatement cost, such that

$$\Pi\_{\rm ll} = \sum\_{k\_{\rm n}=1}^{K\_{\rm n}} \pi\_{k\_{\rm n}} - F\_{\rm l} - A\_{\rm ll} \tag{6}$$

$$F\_n = d(Q, S) \cdot \theta \tag{7}$$

$$A\_n = \sum\_{k\_n=1}^{K\_n} m\_{k\_n}(\Gamma\_{k\_n} \{1, \text{' } 2, \text{' } 3 \dots N\}) \tag{8}$$

where *Fn* is a fine on excess salt loads, *ϑ* is pollution fine per unit of excess salt load, *d* is salt load, *An* is abatement cost, and Γ*kn* {1, 2, 3 . . . *N*} is a set of abatement options, such as changing cropping patterns, fallowing land, adopting more efficient irrigation technologies, and investing in monitoring drainage quantity and quality. Each subarea can select one of these abatement options or a subset of the abatement options.
