Sustainable Agreements on Stochastic River Flow

Harold Houba and Erik Ansink

No 13-182/II, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Many water allocation agreements in transboundary river basins are inherently unstable. Due to stochastic river flow, agreements may be broken in case of drought. The objective of this paper is to analyze whether water allocation agreements can be self-enforcing, or sustainable. We do so using an infinitely-repeated sequential game that we apply to several classes of agreements.To derive our main results we apply the Folk Theorem to the river sharing problem using the equilibrium concepts of subgame-perfect equilibrium and renegotiation-proof equilibrium. We show that, given the upstream-downstream asymmetry, sustainable agreements allow downstream agents to reap the larger share of the benefits of cooperation.

Keywords: river sharing; sustainable agreements; repeated sequential game; Folk Theorem; water allocation; renegotiation-proofness (search for similar items in EconPapers)
JEL-codes: C73 D74 F53 Q25 (search for similar items in EconPapers)
Date: 2013-11-08
New Economics Papers: this item is included in nep-agr, nep-env and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Sustainable agreements on stochastic river flow (2016)
Working Paper: Self-enforcing Agreements on Water allocation (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20130182

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