A groundwater market model

TL;DR

This paper models groundwater trading among stakeholders, analyzing equilibrium outcomes and the impact of water rights banking on intertemporal water management in a multi-period setting.

Contribution

It introduces a novel groundwater market model that captures trading dynamics, equilibrium analysis, and the effects of water rights banking over multiple periods.

Findings

Characterization of Nash equilibrium in a single-period groundwater market

Insights into how water rights banking influences intertemporal water allocation

Initial results on multi-period market dynamics and agent strategies

Abstract

We introduce the problem of groundwater trading, capturing the emergent groundwater market setups among stakeholders in a given groundwater basin. The agents optimize their production, taking into account their available water rights, the requisite water consumption, and the opportunity to trade water among themselves. We study the resulting Nash equilibrium, providing a full characterization of the 1-period setting and initial results about the features of the multi-period game driven by the ability of agents to bank their water rights in order to smooth out the intertemporal shocks.