Due to increasing demand for the scarce available water throughout the world it is an extremely important matter, in water management, to make serious attempts in determining its true economic value. This paper discusses the optimal allocation of water to agriculture, the relatively true economic value of water as well as the cropping patterns for the Shirvan Barzo (SB) dam area in North Khorasan Province of Iran. The analysis is based on linear programming (LP) and on multi goal linear

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... ing (MGLP) models for determining solutions that can maximize net return to farmers. In the study, the priority of goals is developmental, social, economical, and environmental respectively. The results indicated that optimizing the cropping patterns along with proper the allocation of irrigation water has yet substantial potential to increase the net return from agriculture. It has already decreased the applied water as much as 19 percent. The results show that the economic value of each unit of agricultural water is estimated to be between 107 to 1296 IRR × 104 per cubic meter. This suggests managing the allocation of water based on optimal models and bring water prices close to its true economic value to motivate the farmers to economize in the applied water. JEL Classification: Q12, Q25