Measuring the Gains to Groundwater Management with Recursive Utility

The current literature on non-cooperative and strategic groundwater extraction assumes user behavior that conforms to the highly stylized assumption of time-additive separability of the individual's objective criterion. This paper examines how the measured gains to management changes when this assumption is relaxed in favor of a recursive utility specification that takes path-dependency into account in modeling the behavior under both the non-cooperative and central management regimes. Application of this framework to the empirical case of Kern County, California shows that the difference in measured management gains is significantly larger than that which is measured under the assumption of time-additive separability. The paper also shows how the computational method of assessing the benefits over time must be modified in order to properly account for these management gains.

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Conference Paper/ Presentation
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JEL Codes:
D91; C73; Q25
Replaced with revised version of paper 07/20/05.
Series Statement:
Selected Paper 134200

 Record created 2017-04-01, last modified 2020-10-28

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