Fair Agreements for Sharing International Rivers with Multiple Springs and Externalities

Rene van den Brink (), Gerard van der Laan and Nigel Moes

No 10-096/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This discussion paper led to a publication in , 'Journal of Environmental Economics and Management' , 63(3), 388-403.

In this paper we consider the problem of sharing water from a river among a group of agents (countries, cities, firms) located along the river. The benefit of each agent depends on the amount of water consumed by the agent. An allocation of the water among the agents is efficient when it maximizes the total benefits. To sustain an efficient water allocation, the agents can compensate each other by paying monetary transfers. Every water allocation and transfer schedule yields a welfare distribution, where the utility of an agent is equal to its benefit from the water consumption plus its monetary transfer (which can be negative). The problem of finding a fair welfare distribution can be modelled by a cooperative game. For a river with one spring and increasing benefit functions, Ambec and Sprumont (2002) propose the downstream incremental solution as the unique welfare distribution that is core-stable and satisfies the condition that no agent gets a utility payoff above its aspiration level. Ambec and Ehlers (2008) generalized the Ambec and Sprumont river game to river situations with satiable agents, i.e., the benefit function is decreasing beyond some satiation point. In such situations externalities appear, yielding a cooperative game in partition function form. In this paper we consider river situations with satiable agents and with multiple springs. For this type of river systems we propose the class of so-called weighted hierarchical solutions as the class of solutions satisfying several principles to be taken into account for solving water disputes. When every agent has an increasing benefit function (no externalities) then every weighted hierarchical solution is core-stable. In case of satiation points, it appears that every weighted hierarchical solution is independent of the externalities.

Keywords: water allocation; river game; externality; core; hierarchical outcome (search for similar items in EconPapers)
JEL-codes: C71 D62 H23 (search for similar items in EconPapers)
Date: 2010-09-20
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Fair agreements for sharing international rivers with multiple springs and externalities (2012)
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