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Stackelberg Social Equilibrium in Water Markets

Author

Listed:
  • Harold Houba

    (School of Business and Economics and Tinbergen Institute, Vrije Universiteit Amsterdam, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands)

  • Françeska Tomori

    (Departament d’Economia and ECO-SOS, Universitat Rovira i Virgili, Av. de la Universitat 1, 43204 Reus, Spain
    Research Institute for Spatial and Real Estate Economics, Vienna University of Economics and Business, Welthandelsplatz 1, 1020 Vienna, Austria)

Abstract

Market power in water markets can be modeled as simultaneous quantity competition on a river structure and analyzed by applying social equilibrium. In an example of a duopoly water market, we argue that the lack of backward induction logic implies that the upstream supplier foregoes profitable strategic manipulation of water to the downstream supplier. To incorporate backward induction, we propose the Stackelberg social equilibrium concept. We prove the existence of Stackelberg social equilibrium in duopoly water markets with an upstream–downstream river structure and derive it in the example of a duopoly market.

Suggested Citation

  • Harold Houba & Françeska Tomori, 2023. "Stackelberg Social Equilibrium in Water Markets," Games, MDPI, vol. 14(4), pages 1-9, July.
    • Handle: RePEc:gam:jgames:v:14:y:2023:i:4:p:54-:d:1191723
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    References listed on IDEAS

    as
    1. Tomori, Françeska & Ansink, Erik & Houba, Harold & Hagerty, Nick & Bos, Charles, 2021. "Market power in California’s water market," Working Papers 2072/534854, Universitat Rovira i Virgili, Department of Economics.
    2. Ansink, Erik & Houba, Harold, 2012. "Market power in water markets," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 237-252.
    3. Stephen Holland, 2006. "Privatization of Water-Resource Development," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 34(2), pages 291-315, June.
    4. Chakravorty, Ujjayant & Hochman, Eithan & Umetsu, Chieko & Zilberman, David, 2009. "Water allocation under distribution losses: Comparing alternative institutions," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 463-476, February.
    5. Françeska Tomori & Erik Ansink & Harold Houba & Nick Hagerty & Charles Bos, 2021. "Market power in California's water market," Tinbergen Institute Discussion Papers 21-011/VIII, Tinbergen Institute.
    Full references (including those not matched with items on IDEAS)

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