In fully appropriated multiple-use river basins, a major potential competitor for a share of water may be publicly sponsored appropriations to supplement low streamflows for fish, wildlife, and recreation, which generates economic values not revealed in the marketplace. Based on a survey of instream recreationists on New Mexico's Rio Chama a travel cost model is developed to identify the potential recreation demand for instream flows. A discrete optimal control model is formulated that solves for the intraseasonal allocation of reservoir releases which maximizes the yearly value of instream recreation benefits, net of values of competing uses in the basin. Results indicate that in New Mexico, reservoir releases which augment low streamflows can return gross recreation benefits in the range of $900 to $1100 per acre-foot (ac ft) of water consumed (1 ac ft = 1.233 x 10 3 m3). This compares to a $40/ac ft cost of using the water. Consequently, results strongly support the hypothesis of potential economic payoff from public investments in and management of instream flow reservations. 1981; Schribner, 1979;Tarlock, 1975Tarlock, , 1978Tarlock, , 1979Thompson, 1982;Welsh, 1976].Increased demands by special interest groups for instream flow reservations from improved sports fisheries have led to studies which link streamflow depth, velocity, and substrate to fish habitat suitability. Criteria adopted by these studies are, however, largely hydrological or biological, with little focus on economic values to compare with costs incurred. Where economic studies have been conducted which optimize economic values in river basin systems, the objective function chosen has commonly been commercial values such as hydroelectricity, with instream "needs" accounted for as an extra minimum flow constraint [Palmer and Snyder, 1985]. Few economic studies have been conducted which explicitly examine economic benefits from instream flow reservations in multiple-use river basins. Exceptions include Daubeft and Young [1981], Walsh et al. [1980, 1985], and Narayanan et al. [1983], all of which used contingent valuation methods as described by Cummings et al. [1985].Given present public attitudes toward environmental values and the relative scarcity of sites in which minimum streamflows are currently maintained, there may be some economic merit in allocating water and/or water rights for fish and wildlife habitat, whitewater boating, and related instream uses. Before water allocations to an instream use pass the test of economic efficiency in a multiple-use basin, it must be demonstrated that the willingness to pay for the instream use exceeds the opportunity cost (benefits foregone) of diverting the water from a competing use (e.g., agriculture).The major objective of this paper ig to test the hypothesis that public investments in and management of stream flow reservations in a multipurpose river basin can be an economically efficient competitor with existing out-of-stream diversions for traditional commercial purposes. To test this hypothesi...