Optimal Phosphorus Management in a Transboundary Setting: A Dynamic Game Approach

Phosphorus (P) runoff from agriculture is a major driver of eutrophication in trans-boundary water systems like Lake Erie. This paper develops a dynamic game model to examine how strategic interactions between the U.S. and Canada shape long-term crop production and environmental outcomes under stochastic soil P dynamics. The results show that while unilateral decisions often lead to higher crop production, they also result in greater environmental damage due to excessive P runoff. In contrast, incorporating transboundary nutrient spillovers naturally reduces P application and mitigates environmental harm, though at the cost of lower production. These findings suggest the importance of integrating biophysical feedback and economic incentives in nutrient management, emphasizing that long-term sustainability requires balancing productivity with environmental constraints.