TitleMunicipal Groundwater Management: Optimal Allocation and Control of a Renewable Natural Resource
Publication TypeJournal Articles
Year of Publication2015
AuthorsMurali, K, Lim, MKim, Petruzzi, NC
JournalProduction and Operations Management
Volume24
Issue9
Pagination1453-1472
Date Published2015
KeywordsMBA, Supply Chain
Abstract

We 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 nonā€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.

URLhttps://onlinelibrary.wiley.com/doi/abs/10.1111/poms.12389
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