Groundwater Extraction for Irrigation Purposes: The Case of Asymmetric Players

Abstract

In this article the author studies the differential game applied to the groundwater resource exploited in a common property regime. The game is solved for two agents, who differ in their water demand (demand asymmetry) as well as in time-preferences (discount rates asymmetry). The author tries to investigate if the cooperation is more beneficial than non-cooperation and if an increase in asymmetry has influence on the efficiency of the solutions. The results show that the more heterogeneous the agents are, the less inefficient is the allocation of water under non-cooperation. Moreover, the cooperation can be considered beneficial for the environment, but not for the agents: a player with lower demand suffers losses in terms of welfare, when the demand asymmetry is high.