On-Farm Reservoir Adoption in the Presence of Spatially Explicit Groundwater Use and Recharge

Groundwater management is conducted in spatial aquifers where well pumping results in localized cones of depression. This is in contrast to the single-cell aquifer used in most economic analyses that assumes groundwater depletion occurs uniformly over a study area. We address two aspects of the optimal management of groundwater: a spatially explicit representation of the aquifer and the potential of on-farm reservoirs to recharge the underlying aquifer. A spatial-dynamic model of the optimal control of groundwater use and on-farm reservoir adoption is developed. Results suggest that a single-cell aquifer overestimates groundwater use and farm net returns over thirty years.