Groundwater Use Decisions Are Strategic Complements

Abstract

We test whether the decisions in a common-pool resource game are better modeled game-theoretically as strategic substitutes or complements using an individual-level dataset of groundwater usage that accounts for 3% of US irrigated agriculture. We find support for strategic complements, suggesting that reciprocity– and/or race-to-depletion–like dynamics are key to understanding groundwater usage.

Keywords: Common-pool resources – US agriculture – groundwater – dynamic game theory – panel data – identification

JEL Classification: Q25