Strategic Behavior and the Environment > Vol 2 > Issue 1

Local Negotiation with Heterogeneous Groundwater Users

Gordon C. Rausser, Department of Agricultural and Resource Economics, University of California, USA, Susan Stratton Sayre, Department of Economics, Smith College, USA, Leo K. Simon, Department of Agricultural and Resource Economics, University of California, USA,
Suggested Citation
Gordon C. Rausser, Susan Stratton Sayre and Leo K. Simon (2012), "Local Negotiation with Heterogeneous Groundwater Users", Strategic Behavior and the Environment: Vol. 2: No. 1, pp 61-82.

Published: 01 Jan 2012
© 2012 G. C. Rausser, S. S. Sayre and L. K. Simon
Group Choice and Negotiation/Bargaining,  Collective action
Collective actionNash bargainingGroundwater

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This paper assesses the political implications of intra-aquifer heterogeneity in the benefits and costs of optimal groundwater management. We use simulation modeling to predict groundwater extraction regimes under two alternative local decision-making structures and compare these structures to optimal management. Local collective action performs poorly when the intra-aquifer disparity in the potential gains is large. Moreover, large intra-aquifer disparity is generally associated with large potential gains. As a result, local collective action is unlikely to be successful in capturing the largest welfare gains. Individual subregions within a groundwater basin almost always benefit most from political structures whose outcomes diverge from optimal management. These results may be of particular interest to policymakers in California. The state of California currently allows local regions to make their own decisions about groundwater management with little outside intervention. The analysis in this paper suggests that there may be regions where large potential gains from optimal management are available, but cannot be realized by the two alternative local political institutions. This suggests that there may be a role for State intervention in the local political processes by which local water management decisions are made.