EFFICIENT MANAGEMENT OF GROUNDWATER QUALITY

This work develops a theoretical framework that considers the pollution transport in groundwater in an optimization of social benefits from a groundwater resource, and provides a spatial and temporal allocation of the use of contaminating inputs. A space dependent social cost function is constructed, taking into account factors such as the wells' locations and emitting firms' locations, in addition to profits from polluting activities. The social optimization is formulated using the pollution concentrations as state variables and the pollution transport as state dynamics. This optimization yields a spatially differentiated shadow price which leads to optimal policy which is nonuniform in general, and uniform only for special cases.