Groundwater Management and Agriculture.

Over the last decades, groundwater irrigation has become commonplace in many regions worldwide. This is largely a consequence of the advances in drilling and pumping technologies and of the development of hydrogeology. Compared with traditional surface water irrigation systems, groundwater irrigation offers more reliable supplies, lesser vulnerability to droughts, and ready accessibility for individual users. However, poor groundwater management and legal controversies are currently at the base of social disputes in the water exploitation. A through and transparent assessment of the relative socio-economic value of groundwater can contribute to mitigate or avoid potential conflicts. In this paper we develop a mathematical model that studies the exploitation of a common groundwater resource in order to take into account the strategic and dynamic interactions among the users of the resource. It is known that a number of different factors may increase the welfare gains of firms but also cause the overexploitation of the aquifer. The aim of the model is to analyze policy options and economic forces that influence the groundwater irrigation sector and its development. Keywords: Groundwater extraction, Agriculture, differential games.