TY - JOUR
T1 - Uncertainty and irreversibility in groundwater resource management
AU - Tsur, Yacov
AU - Zemel, Amos
PY - 1995
Y1 - 1995
N2 - Optimal exploitation of renewable groundwater resources when extraction affects the probability of occurrence of an irreversible event is studied. The term irreversible signifies that the event occurrence renders the resource obsolete. It is found that uncertainty concerning the event occurrence has a profound effect. Under certainty-when the stock level below which the event occurrence has a profound effect-the optimal state process converges to a unique equilibrium state. Under uncertainty, when the event occurrence level is unknown, we identify equilibrium intervals and show that optimal processes initiated elsewhere converge to a boundary of one of these intervals. Inside an equilibrium interval, the expected loss due to the event occurrence is so high that it does not pay to extract in excess of recharge, even though under certainty doing so would be beneficial.
AB - Optimal exploitation of renewable groundwater resources when extraction affects the probability of occurrence of an irreversible event is studied. The term irreversible signifies that the event occurrence renders the resource obsolete. It is found that uncertainty concerning the event occurrence has a profound effect. Under certainty-when the stock level below which the event occurrence has a profound effect-the optimal state process converges to a unique equilibrium state. Under uncertainty, when the event occurrence level is unknown, we identify equilibrium intervals and show that optimal processes initiated elsewhere converge to a boundary of one of these intervals. Inside an equilibrium interval, the expected loss due to the event occurrence is so high that it does not pay to extract in excess of recharge, even though under certainty doing so would be beneficial.
UR - http://www.scopus.com/inward/record.url?scp=0028854750&partnerID=8YFLogxK
U2 - 10.1006/jeem.1995.1037
DO - 10.1006/jeem.1995.1037
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AN - SCOPUS:0028854750
SN - 0095-0696
VL - 29
SP - 149
EP - 161
JO - Journal of Environmental Economics and Management
JF - Journal of Environmental Economics and Management
IS - 2
ER -