Economics of Transboundary Aquifer Management

This paper presents a general model of optimal water management for a transboundary aquifer under three different management approaches: cooperative, noncooperative, and myopic. Comparing the results from the approaches, we find the cooperative solution, where a single management plan is executed for all parts of the aquifer, results in the highest level of net social welfare, followed by the noncooperative and then the myopic. The trade-offs we find for the higher levels of welfare are lower use levels in the earlier periods. We present a short discussion of factors that can increase the inefficiencies of the models and suggest directions for future research.