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Scope and Sustainability of Cooperation in Transboundary Water Sharing of the Volta River

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  • Bhaduri, Anik
  • Perez, Nicostrato D.
  • Liebe, Jens

Abstract

The paper explores the scope and sustainability of a self-enforcing cooperative agreement in the framework of a game theoretic model, where the upstream and downstream country, Burkina Faso and Ghana respectively in the Volta River Basin, bargain over the level of water abstraction in the upstream. In the model we consider the case where the downstream country, Ghana, offers a discounted price for energy export to the upstream country, Burkina Faso, to restrict its water abstraction rate in the upstream. The paper examines the benefits and sustainability of such self-enforcing cooperative arrangements between Ghana and Burkina Faso given stochastic uncertainty in the river flow. The findings of the paper suggest that at the present condition, the marginal benefit of Burkina Faso from increasing the water abstraction is much higher than that of Ghana’s marginal loss. However, the paper finds that if both countries’ water abstraction rates are at a much higher level, then the marginal loss of Ghana increases phenomenally from similar increase in water abstraction rate by Burkina Faso. Under such circumstances, there is an opportunity for Ghana to provide side payments in terms of discounted export price of power in order to motivate Burkina Faso to restrict water abstraction.

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Bibliographic Info

Paper provided by University of Bonn, Center for Development Research (ZEF) in its series Discussion Papers with number 43324.

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Date of creation: 19 Sep 2008
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Handle: RePEc:ags:ubzefd:43324

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Related research

Keywords: Bargaining; Cooperation; Transboundary; Uncertainty; Volta River Basin; Demand and Price Analysis; Environmental Economics and Policy; Risk and Uncertainty;

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  1. Just, Richard E. & Netanyahu, Sinaia, 2000. "The importance of structure in linking games," Agricultural Economics, Blackwell, vol. 24(1), pages 87-100, December.
  2. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
  3. Erik Ansink & Arjan Ruijs, 2008. "Climate Change and the Stability of Water Allocation Agreements," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 41(2), pages 249-266, October.
  4. Spagnolo, Giancarlo, 2001. "Issue Linkage, Credible Delegation, and Policy Cooperation," CEPR Discussion Papers 2778, C.E.P.R. Discussion Papers.
  5. Bhaduri, Anik & Barbier, Edward B., 2008. "International water transfer and sharing: the case of the Ganges River," Environment and Development Economics, Cambridge University Press, vol. 13(01), pages 29-51, February.
  6. Just, Richard E. & Netanyahu, Sinaia, 2000. "The importance of structure in linking games," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 24(1), December.
  7. Edward B. Barbier, 2004. "Water and Economic Growth," The Economic Record, The Economic Society of Australia, vol. 80(248), pages 1-16, 03.
  8. Carlo Carraro & Carmen Marchiori & Alessandra Sgobbi, 2006. "Applications of negotiation theory to water issues," Working Papers 2006_09Classification-JEL, Department of Economics, University of Venice "Ca' Foscari".
  9. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
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Cited by:
  1. Bhaduri, Anik & Manna, Utpal & Barbier, Edward B. & Liebe, Jens, 2009. "Cooperation in transboundary water sharing under climate change," Discussion Papers 51303, University of Bonn, Center for Development Research (ZEF).

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