Collective Action and the Commons: Are Cooperative Groundwater Institutions Stable in the Presence of Environmental Externalities?

Groundwater is a common-pool resource with several negative externalities associated with its use. Cooperation among users is promoted as a means of achieving better management, internalizing the damages of users’ activities and reducing extractions. Water extractions in each subaquifer affect the pumping costs in the other regions (extraction externality) and also the health of the ecosystem connected to the aquifer (environmental externality).