Journal Article

Optimal Self-Protection from Nitrate-Contaminated Groundwater

Richard C. Ready and Kimberly Henken

in American Journal of Agricultural Economics

Published on behalf of Agricultural and Applied Economics Association

Volume 81, issue 2, pages 321-334
Published in print May 1999 | ISSN: 0002-9092
Published online May 1999 | e-ISSN: 1467-8276 | DOI: http://dx.doi.org/10.2307/1244584
Optimal Self-Protection from Nitrate-Contaminated Groundwater

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Self-protection by well owners from potential nitrate contamination is modeled as an optimal stopping problem, where an owner sequentially tests the well and uses the test results to update his or her subjective probability that the well is contaminated. Because nitrate concentrations in a well vary over time, a single test contains limited information about whether the well is contaminated. The optimal self-protection strategy may therefore involve multiple tests or may not involve any tests at all. For Kentucky wells, optimal self-protection reduces a well owner's expected damage from nitrate contamination by 38%, relative to taking no action.

Keywords: agriculture; groundwater; nitrogen; sequential probability ratio test; Q250

Journal Article.  0 words. 

Subjects: Renewable Resources and Conservation

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