Sharing a River with Downstream Externalities

Sarina Steinmann and Ralph Winkler
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Sarina Steinmann: Department of Economics and Oeschger Centre for Climate Change Research, University of Bern, Schanzeneckstrasse 1, CH-3012 Bern, Switzerland

Games, 2019, vol. 10, issue 2, 1-15

Abstract: We consider the problem of efficient emission abatement in a multi polluter setting, where agents are located along a river in which net emissions accumulate and induce negative externalities to downstream riparians. Assuming a cooperative transferable utility game, we seek welfare distributions that satisfy all agents’ participation constraints and, in addition, a fairness constraint implying that no coalition of agents should be better off than it were if all non-members of the coalition would not pollute the river at all. We show that the downstream incremental distribution, as introduced by Ambec and Sprumont (2002), is the only welfare distribution satisfying both constraints. In addition, we show that this result holds true for numerous extensions of our model.

Keywords: downstream externalities; downstream incremental distribution; optimal emission abatement; river pollution (search for similar items in EconPapers)
JEL-codes: C C7 C70 C71 C72 C73 (search for similar items in EconPapers)
Date: 2019
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