The importance of foresight when comparing competitive versus centralized groundwater management

Groundwater systems are vulnerable to individual users making pumping decisions that benefit themselves but increase the aggregate costs of all users. The standard approach to projecting the gains from coordinated groundwater management has been to model and compare a scenario where pumping decisions are made by myopic, competitive individuals to a scenario where decisions are made by a central manager with an infinite planning horizon. In reality though, competitive users are not completely myopic. Here we deploy a novel framework where the groundwater user’s planning horizon length is an adjustable parameter. In our framework, groundwater users are competitors in a Receding Horizon Game where at each time step of simulation (1) a generalized game is solved to obtain the optimal planned pumping sequences of all users during a given horizon, (2) each user plays only their first pumping decision from the planned sequence, and (3) the procedure is repeated from the next time step with updated aquifer information. We compare outcomes using different planning horizon lengths and show that even short but non-zero planning horizons significantly decrease overdraft and improve system outcomes compared to completely myopic competition. We also illustrate how the planning horizon length (a temporal dimension) and the distance between wells (a spatial dimension) are analogs, having similar impacts on externalities. In our stylized model, we find that lengthening the planning horizon of competitive users can reduce relative aquifer overdraft from 43% to 23%, whereas increasing the spacing between wells decreases the relative overdraft to 28%.