A group of agents located along a river have quasi-linear preferences over water and money. We ask how the water should be allocated and what money transfers should be performed. We are interested in efficiency, stability (in the sense of the core), and fairness (in a sense to be defined). We first show that the cooperative game associated with that problem is convex: its core is therefore large and easily described. Next, we propose the following fairness requirement: no group of agents should enjoy a welfare higher than what it could achieve in the absence of the remaining agents. We prove that only one welfare distribution in the core satisfies this condition: its marginal contribution vector corresponding to the ordering of the agents along the river. We discuss how it could be decentralized or implemented.
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Ambec, S. & Sprumont, Y., 2000.
"Sharing a River,"
Cahiers de recherche
2000-08, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
AMBEC, Steve & SPRUMONT, Yves, 2000.
"Sharing a River,"
Cahiers de recherche
2000-08, Universite de Montreal, Departement de sciences economiques.
[Downloadable!]
Ambec, S. & Sprumont, Y., 2000.
"Sharing a River,"
Papers
00-06, Laval - Recherche en Energie.
Find related papers by JEL classification: D62 - Microeconomics - - Welfare Economics - - - Externalities C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
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