Dynamic adaptation to resource scarcity and backstop availability: theory and application to groundwater

In this paper we analyse the optimal management of a renewable resource (groundwater) with stock-dependent extraction cost and a backstop substitute, facing two-sector linear demands. Application to the Kiti region in Cyprus demonstrates the model’s performance and is used to test for the difference between optimal and myopic behaviour. It is found that the presence of a backstop resource diminishes the importance of optimal dynamic behaviour, whereas in the absence of backstop the optimal control solution yields a value for social welfare significantly larger than the myopic policy.


Issue Date:
2006-06
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/116930
Published in:
Australian Journal of Agricultural and Resource Economics, Volume 50, Issue 2
Page range:
227-245
Total Pages:
19




 Record created 2017-04-01, last modified 2017-08-26

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