The Economics of Conjunctive Groundwater Management with Stochastic Surface Supplies

Groundwater management with stochastic surface flows and artificial recharge is considered. Theoretical analysis characterizes the decision rules and establishes conditions for convergence of socially optimal and common property withdrawals and pumping lifts to limiting probability distributions. An empirical application to Kern County, California finds that optimal withdrawals are generally increasing in hydraulic head and decreasing in surface flows; however, nonmonotone behavior is observed in some instances. Artificial recharge is not observed in the limiting distribution due to an interaction of several factors. Optimal management implies relatively small gains over unregulated groundwater use when preferences are risk neutral.