To include as many interfaces of water-resource use as possible, the basin- 

 wide firm concept developed by Timmons,' and Kneese and Bower^ was 

 employed. The basin-wide firm concept is essentially combining all firms into 

 one decision-making unit (as if by merger), and this one decision-making unit 

 would allocate all resources. To extend this basin-wide firm concept, households 

 and communities were included as a part of the basin-wide firm. A linear pro- 

 gramming model reflecting the many users and uses of surface waters was 

 developed for optimization. Model variations were employed to cover two water- 

 quality levels, three river-flow levels, and change in water-use patterns due to 

 projected population increase by 1980. 



1.1 Plan of this Report 



This report is presented in nine parts which are, in order of presentation: (1) 

 model and method of analysis; (2) influence of objective optimized on resource 

 allocation, level of economic activity, and water use; (3) resource allocation and 

 implied prices for lake and lake-related land resources; (4) resource allocation 

 and implied prices for various river-flow levels; (5) influence on resource alloca- 

 tion among three areas of the Ashuelot River basin taken separately; (6) effect of 

 improving the water-quality level; (7) sensitivity of resource allocation and 

 implied prices to price changes; (8) comparison of two river basins; and (9) 

 projection of change in resource use to 1980. 



The Ashuelot River, located in western New Hampshire and shown diagram- 

 matically in Figure 1.1, was chosen for detailed analysis. The Lamprey River, 

 located in eastern New Hampshire, was chosen for comparison purposes. 



1.2 Description of the Ashuelot Watershed 



The Ashuelot River drains an area of 394 square miles over its 65-mile length. 

 In the northern headwaters region in Marlow, New Hampshire, the watershed is 

 sparsely populated, with a moderate amount of logging, and there is considerable 

 private and public recreational activity. The city of Keene in the central portion, 

 with a 1970 population of 20,500, is the major shopping and business center for 

 the southwestern area of New Hampsliire. Keene contains numerous manufac- 

 turing activities and an institution of higher learning. South of Keene are the 

 small mill towns of Troy, Winchester, and Hinsdale. Several major water- 

 using industries are found here, including two paper mills, a tannery, and a 

 textile mill. The river ends in Hinsdale, New Hampshire, where it has a con- 

 fluence with the Connecticut River. From origin to source, the river falls about 

 2,000 feet. The slope of the fall is rapid in the upper and the lower portions of 

 the river. In the central portion, the river falls relatively little, and the rate of 

 flow is rather slow. A graph of the rate of fall of the river is shown in Figure 1 .2. 

 Eight impoundments of water, including one major flood-control impoundment, 

 Surry Mountain Dam, are located on the river. 



'Timmons, J. F. "Economic Framework for Watershed Development," yow/-rtfl/o/Farw 

 Economics, Vol. 46, No. 5, pp. 1170-1183, 1954. 



^Kneese, A. V., and Bower, B. T. Managing Water Quality: Economics, Technology, 

 Institutions. Baltimore: The Johns Hopkins Press, 1968. 



