Abstract
A relatively simple economic model for allocation of groundwater in time is developed. The economic consequences of altering various parameters in the model are examined with respect to the effect on equilibrium stocks and rate of use. The concept of a conditional decision rule for stochastic groundwater recharge and the properties of the implied equilibrium are discussed. In its simplest form, the derived decision rule is to equate marginal net output with respect to rate of use to capitalized marginal net output with respect to water stocks.
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