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Simple Mechanisms for Managing Complex Aquifers
Standard economic models of groundwater management assume perfect transmissivity (i.e., the aquifer behaves as a bathtub), no external effects of groundwater stocks, and/or homogenous agents. In this article, we develop a model relaxing these assumptions. Although our model generalizes to an arbitrary number of cells, we are able to obtain key insights with a two-cell finite-horizon differential game. We find a simple linear mechanism that induces the socially optimal extraction path indoi:10.22004/ag.econ.312942 fatcat:s6yhl2qplfdypi3gkweeiqn3a4