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

Author

Listed:
  • 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.

Suggested Citation

  • James Roumasset & Christopher Wada, 2009. "Renewable Resource Management with Alternative Sources: the Case of Multiple Aquifers and a "Backstop" Resource," Working Papers 200913, University of Hawaii at Manoa, Department of Economics.
  • Handle: RePEc:hai:wpaper:200913
    as

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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_09-13R.pdf
    File Function: First revised version, 2009
    Download Restriction: no

    References listed on IDEAS

    as
    1. Im, Eric Iksoon & Chakravorty, Ujjayant & Roumasset, James, 2006. "Discontinuous extraction of a nonrenewable resource," Economics Letters, Elsevier, vol. 90(1), pages 6-11, January.
    2. 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.
    3. 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.
    4. 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, vol. 91(1), pages 138-153.
    5. Chakravorty, Ujjayant & Krulce, Darrell & Roumasset, James, 2005. "Specialization and non-renewable resources: Ricardo meets Ricardo," Journal of Economic Dynamics and Control, Elsevier, vol. 29(9), pages 1517-1545, September.
    6. 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, vol. 79(4), pages 1218-1228.
    7. Chakravorty, Ujjayant & Krulce, Darrell L, 1994. "Heterogeneous Demand and Order of Resource Extraction," Econometrica, Econometric Society, vol. 62(6), pages 1445-1452, November.
    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. Richard Horan & James Shortle, 1999. "Optimal Management of Multiple Renewable Resource Stocks: An Application to Minke Whales," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 13(4), pages 435-458, June.
    10. Chakravorty, Ujjayant & Roumasset, James & Tse, Kinping, 1997. "Endogenous Substitution among Energy Resources and Global Warming," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1201-1234, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Renewable resources; dynamic optimization; multiple resources;

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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