Dynamic adaptation to resource scarcity and backstop availability: theory and application to groundwater
In this paper we analyse the optimal management of a renewable resource (groundwater) with stock-dependent extraction cost and a backstop substitute, facing two-sector linear demands. Application to the Kiti region in Cyprus demonstrates the model’s performance and is used to test for the difference between optimal and myopic behaviour. It is found that the presence of a backstop resource diminishes the importance of optimal dynamic behaviour, whereas in the absence of backstop the optimal control solution yields a value for social welfare significantly larger than the myopic policy.
Volume (Year): 50 (2006)
Issue (Month): 2 (June)
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- Koundouri, Phoebe, 2004.
"Current issues in the economics of groundwater resource management,"
38425, University Library of Munich, Germany.
- Phoebe Koundouri, 2004. "Current Issues in the Economics of Groundwater Resource Management," Journal of Economic Surveys, Wiley Blackwell, vol. 18(5), pages 703-740, December.
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- Koundouri, Phoebe, 2000. "Three approaches to measuring natural resource scarcity: theory and application to groundwater," MPRA Paper 38265, University Library of Munich, Germany.
- 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.
- Tsur, Yacov & Zemel, Amos, 2000. "R&D policies for desalination technologies," Agricultural Economics, Blackwell, vol. 24(1), pages 73-85, December.
- 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.
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