River pollution abatement: Decentralized solutions and smart contracts

Jens Gudmundsson and Jens Leth Hougaard ()
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Jens Leth Hougaard: Department of Food and Resource Economics, University of Copenhagen

No 2021/07, IFRO Working Paper from University of Copenhagen, Department of Food and Resource Economics

Abstract: In river systems, costly upstream pollution abatement creates downstream welfare gains. Absent adequate agreement on how to share the gains, upstream regions lack incentives to reduce pollution levels. We develop a model that makes explicit the impact of water quality on production benefits and suggest a solution for sharing the gains of optimal pollution abatement, namely the Shapley value of an underlying convex cooperative game. We provide a decentralized implementation through a smart contract to automate negotiations. It ensures a socially optimal agreement supported by fair compensations to regions that turn to cleaner production from those that pollute.

Keywords: River pollution; Decentralized mechanism; Shapley value; Water quality; Smart contract (search for similar items in EconPapers)
JEL-codes: C7 D47 D62 Q25 Q52 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2021-09, Revised 2021-10
New Economics Papers: this item is included in nep-agr, nep-des, nep-env, nep-gth and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:foi:wpaper:2021_07

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