Optimal Groundwater Extraction under Uncertainty and a Spatial Stock Externality.

ABSTRACT: We introduce a model that incorporates two important elements to estimating welfare gains from groundwater management: stochasticity and a spatial stock externality. We estimate welfare gains resulting from optimal management under uncertainty as well as a gradual stock externality that produces the dynamics of a large aquifer being slowly exhausted. This groundwater model imposes an important aspect of a depletable natural resource without the extreme assumption of complete exhaustion that is necessary in a traditional single cell (bathtub) model of groundwater extraction. Using dynamic programming, we incorporate and compare stochasticity for both an independent and identically distributed as well as a Markov chain process for annual rainfall. We find that the spatial depletion of the aq

SUBMITTER: Merrill NH 

PROVIDER: S-EPMC5759790 | biostudies-literature | 2018 Jan

REPOSITORIES: biostudies-literature