Competition versus coopertion in groundwater extraction: A stochastic framework with heteregoneous agents

We analyze a game with N farmers that extract groundwater from a common aquifer of small storage capacity. Our aim is to compare the socially optimal, myopic and feedback extraction strategies, the latter arising from competitive interaction between extracting agents. Our extension to existing literature is that we consider heterogeneous farmers, facing uncertainty deriving from stochastic rainfall. The farmers differ in terms of their choice of irrigation technology, which results in different farmer-speci�c impact on the aquifer recharge rate. We illustrate the implications of the di¤erent strategies on extraction rates, groundwater table levels and welfare attained, via simulations based on data from the Kiti aquifer in Cyprus.