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Title:Optimal mechanisms for heterogeneous multi-cell aquifers PDF Logo
Authors:Athanassoglou, Stergios
Sheriff, Glenn
Siegfried, Tobias
Huh, Woonghee Tim
Issue Date:2011
Series/Report no.:Nota di lavoro // Fondazione Eni Enrico Mattei: Sustainable development 28.2011
Abstract: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 homogenous 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.
Subjects:Common Property Resource
Differential Games
Groundwater Extraction
Imperfect Monitoring
Markov Perfect Equilibrium
JEL:C6
D0
Document Type:Working Paper
Appears in Collections:FEEM Working Papers, Fondazione Eni Enrico Mattei

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