Competition between different groundwater uses under water scarcity

We study groundwater management under a regime shock affecting water availability, using a dynamic common-property resource game. The different players correspond to different groundwater uses (irrigation or urban water supply), enabling us to consider competition between economic sectors for the stock with limited availability. The players have different water demand functions and, under certain circumstances depending on the shock, different discount rates. The effects of asymmetries in both demand and discount rates are analyzed, comparing cooperative and non-cooperative solutions. A numerical analysis for the particular case of the Western La Mancha aquifer in Spain is conducted to analyze the degree of inefficiency of non-cooperative solutions with respect to cooperative solutions in terms of welfare. We show that a higher asymmetry in discount rates reduces the inefficiency of non-cooperative solutions. The opposite result is obtained when considering the asymmetry in demand.