LINKING THE UNLINKED: TRANSBOUNDARY WATER-SHARING UNDER WATER-FOR-LEVERAGE NEGOTIATIONS
Shaikh Eskander (),
Thorsten Janus () and
Edward Barbier ()
No 235650, 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts from Agricultural and Applied Economics Association
We develop a game-theoretic framework of negotiation over sharing of trans-boundary resources between neighboring countries. The downstream country offers a non-water “leverage” good in exchange for water access and makes a take-it-or-leave-it offer to the upstream country. The downstream country can further invest in water provision before the negotiations. We compare three types of outcomes: the first-best outcomes where an “ex-ante social planner” choses both the water investment and the water and leverage goods exchanged in the negotiations; the outcome when an “ex-post social planner” only enters at the negotiation stage; and the outcome of bilateral negotiations. We argue that all three cases can be empirically realistic; show that the outcome with the ex-post social planner can distort the downstream country’s investment incentive; and that the bilateral negotiation outcome can lead to water investment either below or above the efficient/ex-ante planner’s preferred choice.
Keywords: Environmental Economics and Policy; Political Economy; Resource /Energy Economics and Policy; Risk and Uncertainty (search for similar items in EconPapers)
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