Cooperation in a Hydro-Geologic Commons: New Institutions and Pricing to Achieve Sustainability and Security Nir Becker, Chair, Department of Economics and Management Tel-Hai College, NRERC, Haifa University, Israel Edna Loehman, Department of Agricultural Economics, Purdue University, USA Abstract Current water use in the area of Israel, Gaza, West Bank, and Jordan is not consistent with a sustainable water supply: growing demands relative to supplies threaten underground aquifers, and water quality problems diminish the health and welfare of current residents and impair future water supplies. A hydro-geologic system can be viewed as a commons that provides a stream of benefits to an entire geographic area over time. Sustainability requires design of new institutions with appropriate boundaries and rules. We propose a regional cooperative management system -- combining aspects of a regional utility and a joint commission -- that would use price incentives for management purposes. The non-profit regional water utility would establish limits on water use, determine water prices, and make investments from system revenues. For efficiency, surface water, groundwater, and recovered water of the same quality should receive the same price. Withdrawal limits based on sustainability would be sufficient to establish prices through the interaction of supply and demand. Equity issues could addressed by a guaranteed water provision with a relatively low price for the guaranteed level. Security in terms of an adequate groundwater storage could be achieved through appropriate investment. A representative body of water users would help the utility determine appropriate limits and guarantees. The conceptual basis for this institutional design is temporal efficiency. While a traditional market could improve spatial allocation, it would not necessarily address sustainability or provide for investment in recycling and other technologies to improve water supply. Furthermore, our proposed system bypasses the issue of property rights required for full market exchange.