Optimization of agricultural water price setting strategy and government subsidy mechanisms based on game analysis

Abstract

Optimizing water resource management to promote water conservation requires coordinated water pricing and government subsidies that ensure both irrigation system reliability and farmers’ compliance with water quotas, while avoiding increases in farmers’ financial burdens. This study develops a non-cooperative game-theoretic framework that incorporates operation and maintenance (O&M) costs, water price approaches, and the payoffs and constraints of both government and farmers to analyze their strategic interactions under different scenarios, with particular emphasis on {S, C} and {S, E}. Here, S represents a sufficient government subsidy that fully covers O&M costs; C indicates farmers comply with water quotas; and E indicates farmers exceed water quotas. Using 13 irrigation districts located in the 13 prefecture-level cities of Jiangsu Province as a case study, the framework is applied to examine two periods, 2013–2015 and 2021–2023. Both the theoretical water pricing strategies and the actual strategies implemented by local governments are compared to identify gaps and their underlying causes. Results show that the provincial average water price was approximately 0.1 yuan (Chinese yuan, RMB) per cubic meter, and that subsidies generally kept farmers’ water fee burden within affordable limits. Actual subsidies were generally lower than theoretical levels, indicating constraints in government willingness to provide full support. In 2013–2015, the actual proportion of water fees borne by the government (APG) averaged 74.9 %, 65.2 %, and 43.1 % in southern, central, and northern Jiangsu, respectively; in 2021–2023, these values were 73.0 %, 62.0 %, and 41.2 %. Despite improved fiscal capacity, governments’ willingness to provide subsidies declined, partly due to the increase in per capita agricultural GDP (AGDPpc), which encompassed income from non-agricultural sources. Nonetheless, APG was significantly and positively correlated with regional per capita GDP (GDPpc) and agricultural per capita GDP (AGDPpc) in both periods. Per-mu irrigation water use (1 ha = 15 mu) decreased from 739–875 m³/mu in 2013–2015, exceeding quota limits, to 522–608 m³/mu in 2021–2023, generally within quota limits. This trend reflects a shift from the {S, E} scenario of high water consumption to the {S, C} scenario of sustainable, quota-compliant irrigation in Jiangsu.