Competition Versus Optimal Control in Groundwater Pumping When Demand is Nonlinear

This article considers the issue of optimal control versus no control in groundwater pumping under the assumption of a nonlinear demand function for water use. We confirm for the case of the nonlinear demand function what had been demonstrated for the case of a linear demand function: namely, if water rights are properly defined and if the storage capacity of the aquifer is relatively large, the difference between a strategy of no control and a strategy of optimal control is small and thus can be ignored for practical policy considerations. Furthermore, we demonstrate that even if simulated optimal control yields slightly better results than no control, a strategy of no control is likely to yield better results than optimal control, unless we can be sure that the estimated demand for groundwater is very close to the true demand.