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Potential Conflict and Inefficiencies Arising in Agri-environmental Management

Authors

  • Elsa Martin,

  • Hubert Stahn

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    • Elsa Martin is an Assistant Professor at AgroSup Dijon – CESAER (UMR 1041 of INRA). E-mail: elsa.martin@dijon.inra.fr for correspondence. Hubert Stahn is a Professor at Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS. We acknowledge Prof. David Harvey for his comments and suggestions that considerably helped improve our work. Remaining errors are of course ours.


Abstract

We characterise the welfare implications of uncoordinated policy decisions in the presence of multiple externalities, illustrated with an aquifer. We concentrate on the problem of coordination that can occur when distinct agricultural and water authorities implement their respective policies (to optimise food production and groundwater use) with environmental concerns in mind. We represent this problem as an open-loop Nash game, which compares the game-theoretical solution to a centrally planned solution. We show that the inefficiencies arise from differences in the account taken of relevant costs by different authorities. We demonstrate that the magnitude of the inefficiency generated by the absence of coordination of our authorities varies depending on the weights put on environmental benefits by each authority, and discuss the implications of analysis for future research and policy.

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