How to explain the dual value (shadow price)?

Problems with syntax of GAMS
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laura_madness
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How to explain the dual value (shadow price)?

Post by laura_madness »

Dear all,

I used a PMP model to simulate the farmer's behaviour in three different conditions of water pricing policies and water availability in a context of conjunctive use of water resource ( surface and groundwater).

The surface water is managed by a Water user Association who define the pricing policy while the groundwater is paid always at a fixed price.

Results show that in every case the total amount of groundwater resource remains unchanged but the shadow price of the resource change.

Could someone help me with the interpretation of this phenomena?

I attached the table of results (shadow price) for each farm type analyzed and each policy implemented.

Thank you so much for your help.
results_shadow_price.PNG
I wouldlike to precise that farmers "f1" use only surface water, farmers f2 only groundwater, and farmers "f3" use both type of the resource
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