The temporal allocation of ground water—A simulation approach

Users of ground water are typically interdependent in that withdrawals affect the conditions of water supply experienced by neighboring pumpers. In such cases all costs are not registered on the unit making the withdrawal decision, and the individual user of ground water is encouraged to withdraw water at a rate faster than is socially optimal. Previous attempts to consider the problem of the optimal rate of pumping over time from a ground‐water basin have used a simplified model for the ground‐water system that assumes that drawdowns in response to withdrawals are uniformly distributed through the basin. However, large differences in drawdown commonly occur in developing ground‐water systems. These differences throughout the basin lead to great variations in water costs and perhaps to localized economic and hydrologic failure. We have incorporated a more realistic ground‐water model into a simulation program representing a ground‐water basin system. The effects of two policy instruments, a use tax and a quota, were investigated for a hypothetical basin in an arid region in which irrigated farming was the principal economic activity. A policy of unrestricted use was compared with a policy of regulation for several alternative aquifer developments. Policies that reduced the rate of withdrawal increased the discounted net economic yield.