Years of drought have parched California’s vast agricultural lands, prompting farmers to drill deeper and deeper into aquifers to irrigate their fields.

But this often means higher water costs for everyone – and inefficient use of a precious resource.

When a farmer draws water from a well, it depletes the aquifer for all the other farmers who rely on it; they have to dig deeper, making the water more costly. But farmers don’t take into account the added cost extraction is creating for their neighbors. That leads them to pump yet more water. Meanwhile, a crazy quilt of overlapping and sometimes contradictory regulations often encourage too much extraction and lead to more expensive water.

Cornell researchers have a solution: Coordinate water use, taking into account all the farms drawing water from a particular aquifer. The approach offers the farms a significant payoff when crop prices are high, according to the study.

“Spatial groundwater management: A dynamic game framework and application to California” appeared in a special issue of Water Economics and Policy on game theory and water resource management.

“If a planner is involved, they’re thinking, ‘If we extract this amount of water at this point of land, it’ll draw down the water stock at that point and make it more expensive in the future. Is that advantageous for the total farming that’s going on in this area?’” said lead author Louis Sears, a doctoral candidate in the field of applied economics and management. “When designing groundwater management policies, it’s important to account for spatial considerations that may lead users to behave uncooperatively.”

His co-authors are David Lim, a postgraduate research assistant at Cornell’s Think-tank for Resources, Energy, and the Environment: Science and Policy-related Economic Analysis and Research (TREESPEAR), and C.-Y. Cynthia Lin Lawell, associate professor of applied economics and management and the Robert Dyson Sesquicentennial Chair in Environmental, Energy and Resource Economics.

Using a dynamic framework based on game theory, the researchers created two competing scenarios – one coordinating water use, the other with no coordination. They calculated the value of the economic efficiency lost or gained, depending on the scenario, on two 50-acre plots of land in California.

Using data on alfalfa grown in the San Joaquin Valley’s Tulare Basin, they calculated the coordinated approach led to an overall efficiency gain of $93,000 for the two farmers when the groundwater supply was moderate and rainfall was normal.

The value of the efficiencies jumped even higher in situations when farmers would normally use water inefficiently. Coordination would save $125,000 in scenarios with a moderate groundwater supply and high rainfall, or a high groundwater supply during a drought.

To capture the regional diversity of California’s crops, hydrological conditions and climate, the researchers also created scenarios with a variety of crops requiring different growing conditions. These included strawberries grown in the Central Coast, walnuts grown in the North Coast and olives grown in the Sacramento Valley.

Coordinated management resulted in a value of as much as $812,226 for strawberries – a high-value crop. But it resulted in no efficiencies for several perennial crops such as walnuts, avocados and oranges. “This shows that the issue can vary in importance with the types of crops grown,” Sears said.

He also noted the savings only reflect the gains made on the two 50-acre plots. “The benefits from coordinated management for all the farmers in the entire Tulare Basin or all of California would be orders of magnitude higher,” he said.

The research has particular relevance as California reforms its groundwater regulations, Sears said, and as climate change shifts the amount of precipitation regions receive.

The researchers recommend policymakers understand the full extent of an area’s hydrology and how many different farmers are impacting each other, he said. “If you have little pockets of different regulations governing one aquifer, that can be really problematic and can create big gulfs in incentives between the different types of farmers,” he said.

For example, giving a farmer a more precise irrigation system might encourage them to plant more crops, or more expensive crops, Sears said, which “can actually exacerbate the problem.”

The research was funded in part by the Giannini Foundation of Agricultural Economics and the Bacon Public Lectureship and White Paper Competition.