Strategic behavior and efficiency in a groundwater pumping differential game

Santiago Rubio and Begoña Casino
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Begoña Casino: Universitat de València

Working Papers. Serie EC from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: In this paper socially optimal and private exploitation of a common property aquifer are compared. Open-loop and feedback equilibria in nonlinear strategies have been computed to characterize the private solution. The use of these two equilibrium concepts aIlows us to distinguish between cost and strategic externalities. The open-Loop solution captures only the cost externality, whereas the feedback solution captures both externalities. The results show that strategic behavior increases the overexploitation of the aquifer compared to the open-loop solution. However, if the groundwater storage capacity is large, the difference between the socIally optImal and private exploitation, characterized by a feedback equilibrium, is negligible and can be ignored for practical purposes. En este trabajo se comparan la explotación privada y socialmente óptima de un acuífero de propiedad común. Para caracterizar la solución privada se han calculado los equilibrios' openloop' y 'feedback' en estrategias no lineales. El uso de estos dos conceptos de equilibrio nos ha permitido distinguir entre efectos externos estratégicos y de coste. La solución 'open-loop' captura solamente el efecto externo de los costes mientras que la SolucIón 'feedback' captura ambos efectos externos. Los resultados muestran que el comportamiento estratégico aumenta la sobreexplotación del acuífero comparado con la solución 'open-loop' o Sin embargo, si la capacidad de almacenamiento del acuífero es grande, la diferencia entre la explotación privada y la socialmente óptima, caracterizada por un equilibrio 'feedback', es despreciable y puede Ignorarse para propósitos prácticos.

Keywords: Explotación de aguas subterráneas; recursos de propiedad común; efecto externo estratégico; juegos diferenciales; solución 'feedback'; estrategias no lineales Groundwater exploitation; common property resources; strategic externality; differential games; feedback solution; nonlinear strategies (search for similar items in EconPapers)
Pages: 56 pages
Date: 1997-12
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasec:1997-18

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