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The Impact of Discount Rate and Price on Intertemporal Groundwater Models in Grant County, Kansas

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  • Vestal, Mallory K.
  • Guerrero, Bridget L.
  • Golden, Bill B.
  • Harkey, Logan D.

Abstract

Agriculture plays a vital role in the growth and development of the High Plains Region of the United States. With the development and adoption of irrigation technology, this region was transformed into one of the most agriculturally productive regions in the world (Peterson et al., 2003). The primary source of irrigation in this region is the Ogallala Aquifer. Currently, water from the aquifer is being used at a much faster rate than natural recharge can occur, resulting in a high rate of depletion from this finite resource. Depletion of scarce water resources will have a significant economic impact on the long-term sustainability of the region. The objective of this study is to evaluate the impact alternative prices and discount rates have on groundwater policy recommendations. Deterministic models of groundwater withdrawals were developed and used in order to analyze and evaluate the impact of high, average, and low crop prices in a status quo scenario as well as a policy scenario reducing irrigated acreage allocation. Furthermore, this study analyzes the effects and associated consequences of alternative discount rates on net and total revenue. As indicated by results of this study, alternative prices, costs, and discount rates utilized in a model have an effect on policy effectiveness. Considering the declining levels of saturated thickness seen in the results of this study, the analysis of alternative discount rates and the associated policy recommendations is merited.

Suggested Citation

  • Vestal, Mallory K. & Guerrero, Bridget L. & Golden, Bill B. & Harkey, Logan D., 2017. "The Impact of Discount Rate and Price on Intertemporal Groundwater Models in Grant County, Kansas," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 253033, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saea17:253033
    DOI: 10.22004/ag.econ.253033
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    File URL: https://ageconsearch.umn.edu/record/253033/files/SAEA%20Grant%20County%202017.pdf
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    References listed on IDEAS

    as
    1. Peterson, Jeffrey M. & Marsh, Thomas L. & Williams, Jeffery R., 2003. "Conserving the Ogallala Aquifer: Efficiency, Equity, and Moral Motives," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 18(1), pages 1-4.
    2. L. Allen Torell & James D. Libbin & Michael D. Miller, 1990. "The Market Value of Water in the Ogallala Aquifer," Land Economics, University of Wisconsin Press, vol. 66(2), pages 163-175.
    3. Oscar R. Burt, 1966. "Economic Control of Groundwater Reserves," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 48(3_Part_I), pages 632-647.
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    Cited by:

    1. Fan, Yubing & Park, Seong C., 2018. "A Meta-analysis of Water Conservation Policies in the Southern Ogallala Aquifer Region," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266656, Southern Agricultural Economics Association.

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