Uncertainty and irreversibility in groundwater resource management

Yacov Tsur, Amos Zemel

Research output: Contribution to journalArticlepeer-review

100 Scopus citations

Abstract

Optimal exploitation of renewable groundwater resources when extraction affects the probability of occurrence of an irreversible event is studied. The term irreversible signifies that the event occurrence renders the resource obsolete. It is found that uncertainty concerning the event occurrence has a profound effect. Under certainty-when the stock level below which the event occurrence has a profound effect-the optimal state process converges to a unique equilibrium state. Under uncertainty, when the event occurrence level is unknown, we identify equilibrium intervals and show that optimal processes initiated elsewhere converge to a boundary of one of these intervals. Inside an equilibrium interval, the expected loss due to the event occurrence is so high that it does not pay to extract in excess of recharge, even though under certainty doing so would be beneficial.

Original languageEnglish
Pages (from-to)149-161
Number of pages13
JournalJournal of Environmental Economics and Management
Volume29
Issue number2
DOIs
StatePublished - 1 Jan 1995

ASJC Scopus subject areas

  • Economics and Econometrics
  • Management, Monitoring, Policy and Law

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