Groundwater Usage and Strategic Complements: Part II (Revealed Preferences)

Abstract

We investigate the strategic nature of farmers’ groundwater usage with a rich dataset from the American Midwest. We propose a new revealed preference test for the groundwater interaction as a dynamic game. We reject a view of groundwater usage decisions as strategic substitutes in favor of strategic complements as a better description.

Keywords

• groundwater
• dynamic game theory
• revealed preferences
• strategic complements
• strategic substitutes