This dissertation develops a model for allocating water between competing users to maximize net economic returns to the basin. An initial water allocation policy is required to determine the initial net income return to the basin. This policy has been established through development of a simple water allocation program, incorporating arbitrary allocation criteria under water restriction conditions. To illustrate how the model operates, synthetic natural inflow and sectoral demand data have been tabulated for a natural catchment area located in the midwestern U.S. real economic data obtained from a literature review indicate the potential economic value of water for the described area. From operation of the model, comparative net economic returns are computed, with the resulting increases validating the optimization process.