One major concern about the future is that water scarcity will grow, particularly in arid regions…

One major concern about the future is that water scarcity
will grow, particularly in arid regions where precipitation levels may be
reduced by climate change. Will our institutions provide for an efficient
response to this problem? To think about this issue, let’s consider groundwater
extraction over time using the two-period model as our lens.

a. Suppose the groundwater comes from a well you have
drilled upon your land that taps an aquifer that is not shared with anyone
else. Would you have an incentive to extract the water efficiently over time?
Why or why not?

b. Suppose the
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One major concern about the future is that water scarcity
will grow, particularly in arid regions where precipitation levels may be
reduced by climate change. Will our institutions provide for an efficient
response to this problem? To think about this issue, let’s consider groundwater
extraction over time using the two-period model as our lens.

a. Suppose the groundwater comes from a well you have
drilled upon your land that taps an aquifer that is not shared with anyone
else. Would you have an incentive to extract the water efficiently over time?
Why or why not?

b. Suppose the groundwater is obtained from your private
well that is drilled into an aquifer that is shared with many other users who
have also drilled private wells. Would you expect that the water from this
common aquifer be extracted at an efficient rate? Why or why not?

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