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

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  • Marita Laukkanen
  • Phoebe Koundouri

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 different strategies on extraction rates, groundwater table levels and welfare attained, via simulations based on data from the Kiti aquifer in Cyprus.

Suggested Citation

  • Marita Laukkanen & Phoebe Koundouri, 2006. "Competition versus coopertion in groundwater extraction: A stochastic framework with heteregoneous agents," DEOS Working Papers 0606, Athens University of Economics and Business.
    • Handle: RePEc:aue:wpaper:0606
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    References listed on IDEAS

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    Cited by:

    1. Nasim, Sanval & Helfand, Steven & Dinar, Ariel, 2020. "Groundwater management under heterogeneous land tenure arrangements," Resource and Energy Economics, Elsevier, vol. 62(C).
    2. Jaehyung Lee & Heesun Jang, 2021. "Groundwater Extraction in the South Korea’s Jeju Island: A Real Options Game Approach under Price Uncertainty," Sustainability, MDPI, vol. 13(6), pages 1-11, March.
    3. Phoebe Koundouri & Ebun Akinsete & Nikolaos Englezos & Xanthi Kartala & Ioannis Souliotis & Josef Adler, 2017. "Economic instruments, behaviour and incentives in groundwater management," DEOS Working Papers 1711, Athens University of Economics and Business.

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    More about this item

    Keywords

    common property resources; groundwater management; difference games; strategic externality;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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