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Competition versus coopertion in groundwater extraction: A stochastic framework with heteregoneous agents

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  • Laukkanen, Marita
  • Koundouri, Phoebe

Abstract

We analyze a game with N farmers that extract groundwater from a common aquifer of small storage capacity. Our aim is to compare the socially optimal, myopic and feedback extraction strategies, the latter arising from competitive interaction between extracting agents. Our extension to existing literature is that we consider heterogeneous farmers, facing uncertainty deriving from stochastic rainfall. The farmers differ in terms of their choice of irrigation technology, which results in different farmer-speci�c impact on the aquifer recharge rate. We illustrate the implications of the di¤erent strategies on extraction rates, groundwater table levels and welfare attained, via simulations based on data from the Kiti aquifer in Cyprus.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41910.

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Date of creation: 2006
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Handle: RePEc:pra:mprapa:41910

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Keywords: common property resources; groundwater management; dif- ference games; strategic externality;

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References

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  1. 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.
  2. 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.
  3. Tsur, Yacov & Zemel, Amos, 2000. "R&D policies for desalination technologies," Agricultural Economics, Blackwell, Blackwell, vol. 24(1), pages 73-85, December.
  4. Benveniste, L M & Scheinkman, J A, 1979. "On the Differentiability of the Value Function in Dynamic Models of Economics," Econometrica, Econometric Society, Econometric Society, vol. 47(3), pages 727-32, May.
  5. 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.
  6. Tsutsui, Shunichi & Mino, Kazuo, 1990. "Nonlinear strategies in dynamic duopolistic competition with sticky prices," Journal of Economic Theory, Elsevier, Elsevier, vol. 52(1), pages 136-161, October.
  7. Wirl, Franz, 1994. "Global warming and carbon taxes: Dynamic and strategic interactions between energy consumers and producers," Journal of Policy Modeling, Elsevier, Elsevier, vol. 16(6), pages 577-596, December.
  8. Tsur Yacov & Zemel Amos, 1995. "Uncertainty and Irreversibility in Groundwater Resource Management," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 149-161, September.
  9. 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.
  10. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262100711, December.
  11. Santiago J. Rubio & Juan P. Castro, 1996. "Long-run groundwater reserves under uncertainty," Investigaciones Economicas, Fundación SEPI, Fundación SEPI, vol. 20(1), pages 71-88, January.
  12. Bill Provencher, 1993. "A Private Property Rights Regime to Replenish a Groundwater Aquifer," Land Economics, University of Wisconsin Press, vol. 69(4), pages 325-340.
  13. Koundouri, Phoebe, 2000. "Three approaches to measuring natural resource scarcity: theory and application to groundwater," MPRA Paper 38265, University Library of Munich, Germany.
  14. Judd, Kenneth L., 1992. "Projection methods for solving aggregate growth models," Journal of Economic Theory, Elsevier, Elsevier, vol. 58(2), pages 410-452, December.
  15. Rubio, Santiago J. & Casino, Begona, 2001. "Competitive versus efficient extraction of a common property resource: The groundwater case," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 25(8), pages 1117-1137, August.
  16. Fisher, Anthony C. & Rubio, Santiago J., 1997. "Adjusting to Climate Change: Implications of Increased Variability and Asymmetric Adjustment Costs for Investment in Water Reserves," Journal of Environmental Economics and Management, Elsevier, vol. 34(3), pages 207-227, November.
  17. Tsur, Yacov & Graham-Tomasi, Theodore, 1991. "The buffer value of groundwater with stochastic surface water supplies," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 201-224, November.
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Cited by:
  1. Wang, Chenggang & Segarra, Eduardo, 2011. "The Economics of Commonly Owned Groundwater When User Demand Is Perfectly Inelastic," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, Western Agricultural Economics Association, vol. 36(1), April.

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