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Strategic Behavior and Efficiency in the Common Property Extraction of Groundwater

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Author Info

  • Santiago Rubio

    ()

  • Begoña Casino

Abstract

Externalities that arise from privateexploitation of groundwater are analyzed by comparing socially optimal and privateextraction. Open-loop Nashequilibrium and stationary Markov feedbackequilibrium in nonlinear strategieshave been computed to characterize privateextraction. The use of thesetwo equilibrium concepts allows us todistinguish between cost andstrategic externalities as long as the open-loop solutioncaptures only the cost externality, and the feedback solution capturesboth. The results show thatstrategic behavior increases theoverexploitation of the aquifer. However, ifthe groundwater storage capacity is large, thedifference between the sociallyoptimal and private extraction is negligible. Copyright Kluwer Academic Publishers 2003

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File URL: http://hdl.handle.net/10.1023/A:1025637705488
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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 26 (2003)
Issue (Month): 1 (September)
Pages: 73-87

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Handle: RePEc:kap:enreec:v:26:y:2003:i:1:p:73-87

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: common property resources; differential games; groundwater extraction; linear versus nonlinear strategies; stationary Markov feedback equilibrium; strategic externality;

References

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  1. Tsutsui, Shunichi & Mino, Kazuo, 1990. "Nonlinear strategies in dynamic duopolistic competition with sticky prices," Journal of Economic Theory, Elsevier, vol. 52(1), pages 136-161, October.
  2. Kim, C. S. & Moore, Michael R. & Hanchar, John J. & Nieswiadomy, Michael, 1989. "A dynamic model of adaptation to resource depletion: theory and an application to groundwater mining," Journal of Environmental Economics and Management, Elsevier, vol. 17(1), pages 66-82, July.
  3. Knapp Keith C. & Olson Lars J., 1995. "The Economics of Conjunctive Groundwater Management with Stochastic Surface Supplies," Journal of Environmental Economics and Management, Elsevier, vol. 28(3), pages 340-356, May.
  4. Provencher Bill & Burt Oscar, 1993. "The Externalities Associated with the Common Property Exploitation of Groundwater," Journal of Environmental Economics and Management, Elsevier, vol. 24(2), pages 139-158, March.
  5. Wirl, Franz & Dockner, Engelbert, 1995. "Leviathan governments and carbon taxes: Costs and potential benefits," European Economic Review, Elsevier, vol. 39(6), pages 1215-1236, June.
  6. Wirl Franz, 1994. "Pigouvian Taxation of Energy for Flow and Stock Externalities and Strategic, Noncompetitive Energy Pricing," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 1-18, January.
  7. Worthington, Virginia E. & Burt, Oscar R. & Brustkern, Richard L., 1985. "Optimal management of a confined groundwater system," Journal of Environmental Economics and Management, Elsevier, vol. 12(3), pages 229-245, September.
  8. Dockner Engelbert J. & Van Long Ngo, 1993. "International Pollution Control: Cooperative versus Noncooperative Strategies," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 13-29, July.
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Citations

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Cited by:
  1. Katrin Erdlenbruch & Raphael Soubeyran & Mabel Tidball & Agnes Tomini, 2012. "(Anti-)Coordination Problems with Scarce Water Resources," Working Papers 12-28, LAMETA, Universtiy of Montpellier, revised Sep 2012.
  2. Stergios Athanassoglou & Glenn Sheriff & Tobias Siegfried & Woonghee Tim Huh, 2009. "Simple Mechanisms for Managing Complex Aquifers," NCEE Working Paper Series 200905, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Oct 2009.
  3. Du Bois, Rodrigo Salcedo & Macias, Miguel Angel Gutierrez, 2013. "Cooperation makes it happen? Groundwater management in Aguascalientes, Mexico: An experimental approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151139, Agricultural and Applied Economics Association.
  4. Stergios Athanassoglou & Glenn Sheriff & Tobias Siegfried & Woonghee Huh, 2012. "Optimal Mechanisms for Heterogeneous Multi-Cell Aquifers," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 52(2), pages 265-291, June.
  5. Msangi, Siwa, 2005. "Measuring the Gains to Groundwater Management with Recursive Utility," 2005 Annual meeting, July 24-27, Providence, RI 19212, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  6. Alain Ayong Le Kama & Agnès Tomini, 2012. "Water Conservation versus Soil Salinity Control," EconomiX Working Papers 2012-8, University of Paris West - Nanterre la Défense, EconomiX.
  7. Isik, Murat, 2005. "The Role of Land Retirement Programs for Management of Water Resources," 2005 Annual meeting, July 24-27, Providence, RI 19542, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  8. Rubio, Santiago J. & Casino, Begona, 2002. "A note on cooperative versus non-cooperative strategies in international pollution control," Resource and Energy Economics, Elsevier, vol. 24(3), pages 251-261, June.
  9. Pfeiffer, Lisa & Lin, C.-Y. Cynthia, 2012. "Groundwater pumping and spatial externalities in agriculture," Journal of Environmental Economics and Management, Elsevier, vol. 64(1), pages 16-30.
  10. Catarina Roseta-Palma, 2003. "Joint Quantity/Quality Management of Groundwater," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(1), pages 89-106, September.
  11. Koundouri, Phoebe, 2004. "Current issues in the economics of groundwater resource management," MPRA Paper 38425, University Library of Munich, Germany.
  12. Strand, Jon, 2010. "The full economic cost of groundwater extraction," Policy Research Working Paper Series 5494, The World Bank.
  13. Guilfoos, Todd & Pape, Andreas D. & Khanna, Neha & Salvage, Karen, 2013. "Groundwater management: The effect of water flows on welfare gains," Ecological Economics, Elsevier, vol. 95(C), pages 31-40.
  14. Hubert Stahn & Agnès Tomini, 2011. "Rainwater Harvesting under Endogenous Capacity of Storage : a solution to aquifer preservation?," Working Papers halshs-00626334, HAL.

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