The role for policy in common pool groundwater use

We consider a model of intertemporal common pool groundwater use with substitutable irrigation technology and declining yields from groundwater stocks where pumping cost/stock externalities arise from the usual common property problem. We contrast competitive and optimal allocations and examine the role of substitutable irrigation capital vis-a-vis the effectuation of efficient methods as well as levels of resource use. A case study involving groundwater use in New Mexico illustrates the procedures and considers the efficacy of some simple policy options regarding the amelioration of inefficiencies.