TY - JOUR
T1 - Optimal Mechanisms for Heterogeneous Multi-Cell Aquifers
AU - Athanassoglou, Stergios
AU - Sheriff, Glenn
AU - Siegfried, Tobias
AU - Huh, Woonghee Tim
N1 - Funding Information:
Acknowledgements The authors gratefully acknowledge the financial support of the Pepsico Foundation and the Cross-Cutting Initiative of the Earth Institute, Columbia University. Comments by the editor and two anonymous referees greatly improved the quality of this paper. We would also like to thank Laura Grant, Upmanu Lall, Andreas Lange, and David Simpson for helpful suggestions.
PY - 2012/6
Y1 - 2012/6
N2 - Standard economic models of groundwater management impose restrictive assumptions regarding perfect transmissivity (i. e., the aquifer behaves as a bathtub), no external effects of groundwater stocks, observability of individual extraction rates, and/or homogeneous agents. In this article, we derive regulatory mechanisms for inducing the socially optimal extraction path in Markov perfect equilibrium for aquifers in which these assumptions do not hold. In spite of the complexity of the underlying system, we identify an interesting case in which a simple linear mechanism achieves the social optimum. To illustrate potential problems that can arise by erroneously imposing simplifying assumptions, we conduct a simulation based on data from the Indian state of Andhra Pradesh.
AB - Standard economic models of groundwater management impose restrictive assumptions regarding perfect transmissivity (i. e., the aquifer behaves as a bathtub), no external effects of groundwater stocks, observability of individual extraction rates, and/or homogeneous agents. In this article, we derive regulatory mechanisms for inducing the socially optimal extraction path in Markov perfect equilibrium for aquifers in which these assumptions do not hold. In spite of the complexity of the underlying system, we identify an interesting case in which a simple linear mechanism achieves the social optimum. To illustrate potential problems that can arise by erroneously imposing simplifying assumptions, we conduct a simulation based on data from the Indian state of Andhra Pradesh.
KW - Common property resource
KW - Differential games
KW - Groundwater extraction
KW - Imperfect monitoring
KW - Markov perfect equilibrium
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U2 - 10.1007/s10640-011-9528-0
DO - 10.1007/s10640-011-9528-0
M3 - Article
AN - SCOPUS:84860783242
SN - 0924-6460
VL - 52
SP - 265
EP - 291
JO - Environmental and Resource Economics
JF - Environmental and Resource Economics
IS - 2
ER -