Natural Resource Management Under Increasing Scarcity and Competition: The Case of Groundwater

Abstract This study examines natural resource management under competing heterogeneous users, climate-induced stress, and usage restrictions. We focus on groundwater, an essential resource for water-dependent activities increasingly threatened by climate change. We introduce a declining recharge in a dynamic game to represent increasing water scarcity, along with a restriction policy that limits non-priority use to prevent overexploitation. The results show that targeted restrictions can improve long-term resource levels and total welfare compared to unregulated and abundant scenarios. However, these benefits come at the expense of the non-priority sector, revealing a trade-off between sustainability and equity.