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Renewable Resource Management with Alternative Sources: the Case of Multiple Aquifers and a "Backstop" Resource

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  • James Roumasset

    ()
    (Department of Economics, University of Hawaii at Manoa)

  • Christopher Wada

    ()
    (Department of Economics, University of Hawaii at Manoa)

Abstract

While renewable resource economics is typically confined to one source and one aggregate demand, resource managers must often decide how to manage multiple sources of a resource simultaneously. In addition, studies of extraction sequencing are typically confined to non-renewable resources. We propose a dynamic optimization model to determine the efficient allocation of groundwater when two coastal aquifers are available for exploitation. We find that Herfindahl’s least-cost-first result for nonrenewable resources does not necessarily apply to renewable resources, even when there is only one demand. Along the optimal trajectory extraction may switch from single to simultaneous use, depending on how the marginal opportunity cost of each resource evolves over time. A numerical simulation for the South Oahu aquifer system, which allows for differentiation of users by elevation and hence distribution costs, illustrates the switching behavior.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_09-13R.pdf
File Function: First revised version, 2009
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Bibliographic Info

Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200913.

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Length: 32 pages
Date of creation: 14 Oct 2009
Date of revision:
Handle: RePEc:hai:wpaper:200913

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Keywords: Renewable resources; dynamic optimization; multiple resources;

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  1. Ujjayant Chakravorty & Darrell Krulce & James Roumasset, 2004. "Specialization and Nonrenewable Resources: Ricardo Meets Ricardo," Working Papers, University of Hawaii at Manoa, Department of Economics 200401, University of Hawaii at Manoa, Department of Economics.
  2. Im, Eric Iksoon & Chakravorty, Ujjayant & Roumasset, James, 2006. "Discontinuous extraction of a nonrenewable resource," Economics Letters, Elsevier, vol. 90(1), pages 6-11, January.
  3. Jasper M. Dalhuisen & Raymond J. G. M. Florax & JHenri L. F. de Groot & Peter Nijkamp, 2003. "Price and Income Elasticities of Residential Water Demand: A Meta-Analysis," Land Economics, University of Wisconsin Press, vol. 79(2), pages 292-308.
  4. Richard Horan & James Shortle, 1999. "Optimal Management of Multiple Renewable Resource Stocks: An Application to Minke Whales," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 13(4), pages 435-458, June.
  5. Chakravorty, Ujjayant & Krulce, Darrell L, 1994. "Heterogeneous Demand and Order of Resource Extraction," Econometrica, Econometric Society, Econometric Society, vol. 62(6), pages 1445-52, November.
  6. Olmstead, Sheila M. & Michael Hanemann, W. & Stavins, Robert N., 2007. "Water demand under alternative price structures," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 181-198, September.
  7. Darrell Krulce & James A. Roumasset & Tom Wilson, 1997. "Optimal Management of a Renewable and Replaceable Resource: The Case of Coastal Groundwater," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 79(4), pages 1218-1228.
  8. Costello, Christopher & Polasky, Stephen, 2008. "Optimal harvesting of stochastic spatial resources," Journal of Environmental Economics and Management, Elsevier, vol. 56(1), pages 1-18, July.
  9. Basharat A. Pitafi & James A. Roumasset, 2009. "Pareto-Improving Water Management over Space and Time: The Honolulu Case," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 91(1), pages 138-153.
  10. Chakravorty, Ujjayant & Roumasset, James & Tse, Kinping, 1997. "Endogenous Substitution among Energy Resources and Global Warming," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(6), pages 1201-34, December.
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