A Game-Theoretic Model of Water Theft During a Drought

We study water use by two geographically proximate farmers in a particular region during a drought. The two farmers each have an endowment of time that can be used either to produce water or to steal water. The price of water is exogenously given. The goal of the two farmers is to maximize their wealth from water production and water theft. In this setting, we perform three tasks. First, we determine the Nash equilibrium of the game-theoretic interaction between the two farmers. Second, we study how this equilibrium depends on the ease with which water can be stolen. Finally, we show how the preceding equilibrium is impacted when there is no water theft and then we determine the maximum amount that a farmer would be willing to pay to prevent theft