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Water supply and consumption uncertainty: a conflict-equilibrium

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  • Konstantin Kogan
  • Charles Tapiero

Abstract

This paper addresses the economic efficiency of water production and distribution in a vertical supply chain consisting of a water-provider and a consumer (municipality). The inherent conflicts over stocks and supply costs that emerge among the parties in the water supply chain are modeled as a zero-sum stochastic differential game. Consequently, the effects of collaboration and competition are contrasted as well as the application of block pricing and subsidies in overcoming potential conflicts between the water-provider and the municipality subject to political risks of not meeting demands for water. The effect of uncertainty is elaborated as well. In particular, we show that when the supply variance depends on the mean supply, the effect of uncertainty depends on the intensity of the conflict between the municipality and the water-provider. Copyright Springer Science+Business Media, LLC 2010

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  • Konstantin Kogan & Charles Tapiero, 2010. "Water supply and consumption uncertainty: a conflict-equilibrium," Annals of Operations Research, Springer, vol. 181(1), pages 199-217, December.
    • Handle: RePEc:spr:annopr:v:181:y:2010:i:1:p:199-217:10.1007/s10479-010-0724-z
    DOI: 10.1007/s10479-010-0724-z
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    References listed on IDEAS

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    1. Rita Martins & Adelino Fortunato, 2005. "Residential water demand under block rates: a Portuguese case study," GEMF Working Papers 2005-09, GEMF, Faculty of Economics, University of Coimbra.
    2. Konstantin Kogan & Charles S. Tapiero, 2007. "Supply Chain Games: Operations Management And Risk Valuation," International Series in Operations Research and Management Science, Springer, number 978-0-387-72776-9, September.
    3. Loehman Edna & Dinar Ariel, 1994. "Cooperative Solution of Local Externality Problems: A Case of Mechanism Design Applied to Irrigation," Journal of Environmental Economics and Management, Elsevier, vol. 26(3), pages 235-256, May.
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    5. Hakimian Hassan, 2003. "Water Scarcity and Food Imports: An Emperical Investigation of the 'Virtual Water' Hypothesis in the MENA Region," Review of Middle East Economics and Finance, De Gruyter, vol. 1(1), pages 70-84, January.
    6. R. Martínez-Espiñeira, 2003. "Estimating Water Demand under Increasing-Block Tariffs Using Aggregate Data and Proportions of Users per Block," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 26(1), pages 5-23, September.
    7. Swallow, Stephen K. & Marin, Carlos M., 1988. "Long run price inflexibility and efficiency loss for municipal water supply," Journal of Environmental Economics and Management, Elsevier, vol. 15(2), pages 233-247, June.
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    Cited by:

    1. Andrea Caravaggio & Luigi De Cesare & Andrea Di Liddo, 2023. "A Differential Game for Optimal Water Price Management," Games, MDPI, vol. 14(2), pages 1-15, April.
    2. Wenyi Du & Yubing Fan & Lina Yan, 2018. "Pricing Strategies for Competitive Water Supply Chains under Different Power Structures: An Application to the South-to-North Water Diversion Project in China," Sustainability, MDPI, vol. 10(8), pages 1-13, August.
    3. Kogan, Konstantin, 2021. "Limited time commitment: Does competition for providing scarce products always improve the supplies?," European Journal of Operational Research, Elsevier, vol. 288(2), pages 408-419.

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