Assessing groundwater policy with coupled economic‐groundwater hydrologic modeling

Abstract This study explores groundwater management policies and the effect of modeling assumptions on the projected performance of those policies. The study compares an optimal economic allocation for groundwater use subject to streamflow constraints, achieved by a central planner with perfect foresight, with a uniform tax on groundwater use and a uniform quota on groundwater use. The policies are compared with two modeling approaches, the Optimal Control Model (OCM) and the Multi‐Agent System Simulation (MASS). The economic decision models are coupled with a physically based representation of the aquifer using a calibrated MODFLOW groundwater model. The results indicate that uniformly applied policies perform poorly when simulated with more realistic, heterogeneous, myopic, and self‐interested agents. In particular, the effects of the physical heterogeneity of the basin and the agents undercut the perceived benefits of policy instruments assessed with simple, single‐cell groundwater modeling. This study demonstrates the results of coupling realistic hydrogeology and human behavior models to assess groundwater management policies. The Republican River Basin, which overlies a portion of the Ogallala aquifer in the High Plains of the United States, is used as a case study for this analysis.