Optimal adaptation strategies to face shocks on groundwater resources

• Published in: Journal of economic dynamics & control Vol. 40; pp. 134 - 153
• Main Authors: de Frutos Cachorro, Julia, Erdlenbruch, Katrin, Tidball, Mabel
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.03.2014; Elsevier Sequoia S.A; Elsevier
• Subjects: Aquifers; Comparative studies; Economic models; Economic theory; Environmental Sciences; Exogenous shock; Groundwater; Groundwater resource; Intermediate technology; Natural resources; Optimal behavior; Random variables; Social costs; Spain; Uncertainty; Water resources management; Western Europe; La Mancha Spain; Spain; Optimal behavior; Uncertainty; Groundwater resource; Exogenous shock; Q25; C61; EAU SOUTERRAINE; RESSOURCES EN EAU; EXOGENOUS SHOCK; ADAPTATION; OPTIMAL BEHAVIOR; UNCERTAINTY; CAPTAGE D'EAU SOUTERRAINE; GROUNDWATER RESOURCE; STRATEGIE; GESTION DES EAUX
• ISSN: 0165-1889; 1879-1743
• DOI: 10.1016/j.jedc.2014.01.005

We consider an exogenous and reversible shock to a groundwater resource, namely a decrease in the recharge rate of the aquifer. We compare optimal extraction paths and the social costs of optimal adaptation in two cases: under certainty, i.e. when the date of occurrence of the shock is known, and under uncertainty, when the date of occurrence of the shock is a random variable. We show that an increase in uncertainty leads to a decrease in precautionary behavior in the short run and to an increase in precautionary behavior in the long run. We apply our model to the particular case of the Western la Mancha aquifer in Spain. We show that, in this context, it is advantageous for the water agency to acquire information on the date of the shock, especially for high-intensity and intermediate-risk events.