This common ratio may then be interpreted as the effective (present value) optimal entitlement price. In an agricultural groundwater use setting, Kuwayama and Brozovic (2013) have further shown that if the marginal damage of the externality is the same for all farms, this outcome can be induced with marketable entitlements that are traded on a one-to-one basis, where the marginal abatement costs of all firms will equal marginal damage multiplied by this ratio. Conversely, if the marginal benefit function is the same at each pumping location, then wells closer to the stream will always be more constrained than wells further from the stream. Annex 3.B provides a complete case study of an applied economic model used to compare the cost-effectiveness of alternative policy instruments, such as land retirement, quotas, or tradable permits to address simulation.