Abstract
ABSTRACT: Conserving the watershed can help to preserve groundwater recharge. Preventing overuse of available water through pricing reforms can also substantially increase the value of an aquifer. Inasmuch as users are accustomed to low prices, efficiency pricing may be politically infeasible, and watershed conservation may be considered as an alternative. We estimate and compare welfare gains from pricing reform and watershed conservation for a water management district in Oahu that obtains its water supply from the Pearl Harbor Aquifer. We find that pricing reform is welfare superior to watershed conservation unless the latter is able to prevent very large recharge losses. If watershed conservation prevents only small recharge losses, its net benefit may be negative. If adoption of watershed conservation delays implementation of pricing reform, the benefits of the latter are significantly reduced.