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Computing Alternating Offers And Water Prices In Bilateral River Basin Management

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  • HAROLD HOUBA

    ()
    (Department of Econometrics, Vrije Universiteit, De Boelelaan 1105, Amsterdam, 1081 HV, Netherlands)

Abstract

This contribution addresses the fundamental critique in Dinar et al. [1992, Theory and Decision 32] on the use of game theory in river basin management: People are reluctant to monetary transfers unrelated to water prices and game theoretic solutions impose a computational burden. For the bilateral alternating-offers model, a single optimization program significantly reduces the computational burden. Furthermore, water prices and property rights result from exploiting the Second Welfare Theorem. Both issues are discussed and applied to a bilateral version of the theoretical river basin model in Ambec and Sprumont [2002, Journal of Economic Theory 107]. Directions for future research are provided.

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Bibliographic Info

Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Game Theory Review.

Volume (Year): 10 (2008)
Issue (Month): 03 ()
Pages: 257-278

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Handle: RePEc:wsi:igtrxx:v:10:y:2008:i:03:p:257-278

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Keywords: Bilateral river basin management; alternating offers; computation; water prices; walrasian equilibrium; second welfare theorem; property rights; non-transferable utility; Subject Classification: C72; Subject Classification: C78; Subject Classification: D50; Subject Classification: D58;

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References

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  1. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 661465000000000387, David K. Levine.
  2. Ambec, S. & Sprumont, Y., 2000. "Sharing a River," Papers 00-06, Laval - Recherche en Energie.
  3. Carlo Carraro & Carmen Marchiori & Alessandra Sgobbi, 2006. "Advances in Negotiation Theory: Bargaining, Coalitions and Fairness," Working Papers 2006_08, Department of Economics, University of Venice "Ca' Foscari".
  4. Busch, L-A. & Wen, Q., 1991. "Perfect Equilibria in a Negotiation Model," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9108, University of Western Ontario, The Centre for the Study of International Economic Relations.
  5. Muthoo, Abhinay, 1992. "Revocable Commitment and Sequential Bargaining," Economic Journal, Royal Economic Society, vol. 102(411), pages 378-87, March.
  6. Houba, Harold, 2007. "Alternating offers in economic environments," Economics Letters, Elsevier, vol. 96(3), pages 316-324, September.
  7. Gordon C. Rausser & Leo K. Simon, 1992. "Noncooperative Model of Collective Decision Making: Multi-Lateral Bargaining Approach, A," Food and Agricultural Policy Research Institute (FAPRI) Publications 90-gatt22, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
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  10. Houba, Harold, 1997. "The policy bargaining model," Journal of Mathematical Economics, Elsevier, vol. 28(1), pages 1-27, August.
  11. Simon, Leo K. & Goodhue, Rachael E. & Rausser, Gordon C. & Thoyer, Sophie & Morardet, Sylvie & Rio, Patrick, 2007. "Structure and Power in Multilateral Negotiations: An Application to French Water Policy," Monographs, University of California, Davis, Giannini Foundation, number 37630.
  12. Herrero, Maria Jose, 1989. "The nash program: Non-convex bargaining problems," Journal of Economic Theory, Elsevier, vol. 49(2), pages 266-277, December.
  13. Crawford, Vincent P, 1982. "A Theory of Disagreement in Bargaining," Econometrica, Econometric Society, vol. 50(3), pages 607-37, May.
  14. Harold Houba & Wilko Bolt, 1997. "Strategic bargaining in the variable threat game," Economic Theory, Springer, vol. 11(1), pages 57-77.
  15. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  16. Carraro, Carlo & Marchiori, Carmen & Sgobbi, Alessandra, 2005. "Applications of negotiation theory to water issues," Policy Research Working Paper Series 3641, The World Bank.
  17. Harold Houba, 2005. "Stochastic Orders of Proposing Players in Bargaining," Tinbergen Institute Discussion Papers 05-063/1, Tinbergen Institute.
  18. Roemer, John E., 1988. "Axiomatic bargaining theory on economic environments," Journal of Economic Theory, Elsevier, vol. 45(1), pages 1-31, June.
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  20. Houba, Harold & Wen, Quan, 2006. "Different time preferences and non-stationary contracts in negotiations," Economics Letters, Elsevier, vol. 91(2), pages 273-279, May.
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Cited by:
  1. Beard, Rodney, 2011. "The river sharing problem: A review of the technical literature for policy economists," MPRA Paper 34382, University Library of Munich, Germany.
  2. Houba, Harold & Pham Do, Kim Hang & Zhu, Xueqin, 2012. "Transboundary Water Management: A joint management approach to the Mekong River Basin," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 125063, Australian Agricultural and Resource Economics Society.
  3. Ansink, Erik & Weikard, Hans-Peter, 2013. "Composition properties in the river claims problem," MPRA Paper 51618, University Library of Munich, Germany.
  4. Erik Ansink & Hans-Peter Weikard, 2012. "Sequential sharing rules for river sharing problems," Social Choice and Welfare, Springer, vol. 38(2), pages 187-210, February.
  5. Erik Ansink, 2009. "Self-enforcing Agreements on Water allocation," Working Papers 2009.73, Fondazione Eni Enrico Mattei.
  6. Harold Houba & Erik Ansink, 2013. "Sustainable Agreements on Stochastic River Flow," Tinbergen Institute Discussion Papers 13-182/II, Tinbergen Institute.
  7. Hurt, Wesley & Osorio, Antonio, 2014. "A Sequential Allocation Problem: The Asymptotic Distribution of Resources," MPRA Paper 56690, University Library of Munich, Germany.
  8. Hurt, Wesley & Osório, António (António Miguel), 2014. "A Sequential Allocation Problem: The Asymptotic Distribution of Resources," Working Papers 2072/237596, Universitat Rovira i Virgili, Department of Economics.
  9. Houba, Harold & Pham Do, Kim Hang & Zhu, Xueqin, 2011. "Saving the Mekong River Basin," MPRA Paper 37407, University Library of Munich, Germany.
  10. Rémy Delille & Jean-Christophe Pereau, 2014. "The Seawall Bargaining Game," Games, MDPI, Open Access Journal, vol. 5(2), pages 127-139, June.

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