Bargaining for recharge: an analysis of cooperating and conjunctive surface water-groundwater management

Recent negotiations between surface water and groundwater users in Idaho highlight a potential mechanism to resolve costly conflict that has arisen in many areas of the western U.S. where surface and groundwater resources are hydraulically connected. This article studies this type of agreement by developing a simple, dynamic model of cooperative bargaining between surface and groundwater users. The model reflects the potential gains to both types of water users from bargaining over a sustained reduction in groundwater pumping to increase surface water flows. In a non-cooperative setting, surface water users choose the groundwater pumping reduction to maximize their net production rents, but doing so is costly, which creates an incentive for surface water users to negotiate with groundwater users. With the theoretical model, we demonstrate that the Nash bargaining path of curtailments is lower than that in the non-cooperative outcome, but that it may be larger or smaller than the first-best outcome. The difference between the bargaining and first-best outcomes depends on the efficiency of groundwater irrigation and the relative bargaining power of surface water and groundwater users. In a numerical simulation, we show that when surface water users possess greater bargaining influence, the bargaining solution involves larger curtailments than is socially optimal and an improvement in irrigation efficiency drives the bargaining solution closer to the non-cooperative outcome. Conversely, when groundwater users possess greater bargaining influence, curtailments are lower than the socially optimal level and an improvement in efficiency drives the bargaining solution closer to the firstbest.