Municipal Groundwater Management: Optimal Allocation and Control of a Renewable Natural Resource

Abstract

W e study a municipal groundwater management problem to determine optimal allocation and control policies in the presence of water transfer opportunities. We establish and characterize threshold polices governing export or import decisions of a given municipality. In the spirit of the Triple Bottom Line (3BL), we ascertain that exporting (importing) water through a water market defined by an exogenous export/import price is detrimental (beneficial) to both society and the environment within the municipality. In contrast, fixed quantity trading between two municipalities defined by an endogenously negotiated export/import price can have positive as well as negative impacts from a global 3BL perspective. In particular, typical trading scenarios that occur between municipalities can be detrimental to the environment. We also study the implications of privatization, and find that a privatized municipality would be more (less) likely to export (import) water as compared to its non-privatized counterpart, resulting in negative implications for society within the municipality. However, if exports are banned, privatization can benefit the environment by mitigating the damage caused by the extraction differential, a phenomenon analogous to the green paradox. Moreover, careful and restricted privatization of municipalities can lead to positive global 3BL impacts from fixed quantity trading.

An Analysis of Price vs. Revenue Protection: Government Subsidies in the Agriculture Industry

“…Dawande et al (2013) propose mechanisms to achieve a socially optimal distribution of water between farmers in India. Murali et al (2015) determine optimal allocation and control policies for municipal groundwater management. An et al (2015) investigate different effects of aggregating farmers through cooperatives.…”

Conceptualizing Social Responsibility in Operations Via Stakeholder Resource‐Based View

“…As groundwater gets depleted in many countries, a solution to manage it better is to trade it on the market. However, Murali et al (2015) show that exporting water through a water market with exogenous price is detrimental to both society and the environment within the community if we consider "triple bottom line benefits." In contrast, fixed quantity trading between two municipalities (with endogenous negotiated price) can have a positive impact globally.…”

Supply chain opportunities at the bottom of the pyramid

“…But does it actually work? Murali et al (2015) show that exporting water through a water market with exogenous price is detrimental to both society and the environment within the community if we consider 'triple bottom line benefits'. Their work generalizes to other commodities as well: consider for instance, India's ban on export of cotton in 2012 and a 30 % tax to discourage export of iron ore in 2011.…”