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The river sharing problem: A review of the technical literature for policy economists

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  • Beard, Rodney

Abstract

Water is essential for life. However, the basic problem of water resource allocation has been that water tends to be over-allocated. Demand for water exceeds the available supply. Essentially, the water economy is bankrupt. Bankruptcy problems have been almost exhaustively studied in the literature on economic theory-primarily from the perspective of cooperative game theory. The main concern of this literature has been how to fairly divide up the assets of a bankrupt entity. In water resource economics cooperative game theory has often been employed as a means of analyzing water resource allocation. It was only recently that the problem of directional flow was incorporated into such analyses. This has come to be known as the “river sharing problem” in the theoretical literature. Accounting for the direction of flow in water resource allocation problems has profound implications for policies that wish to facilitate both fair and efficient water allocations. This is the case whether proposed policies are interventionist or market based in nature. There is now a considerable literature on the allocation and distribution of water resources characterized by unidirectional flow. In this paper I critically review and appraise this literature with a view to making it more accessible to applied and policy economists. A key feature of the paper is that the connection between the bankruptcy literature, which has recently also realized the importance of flow, and the river sharing literature is discussed. The current state of the art in game theoretic models of water resource allocation with directional flow is discussed and implications and consequences for water resource policy highlighted

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34382.

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Date of creation: 28 Oct 2011
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Handle: RePEc:pra:mprapa:34382

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Keywords: River sharing problem; Bankruptcy; Cooperative game theory; Water resouyrce allocation; distributive justice;

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  1. Hippolyte D'Albis & Stefan Ambec, 2010. "Fair Intergenerational Sharing of a Natural Resource," Post-Print hal-00630440, HAL.
  2. Weber, Marian L., 2001. "Markets for Water Rights under Environmental Constraints," Journal of Environmental Economics and Management, Elsevier, vol. 42(1), pages 53-64, July.
  3. Parrachino, Irene & Dinar, Ariel & Patrone, Fioravante, 2006. "Cooperative game theory and its application to natural, environmental, and water resource issues : 3. application to water resources," Policy Research Working Paper Series 4074, The World Bank.
  4. Ni, Debing & Wang, Yuntong, 2007. "Sharing a polluted river," Games and Economic Behavior, Elsevier, vol. 60(1), pages 176-186, July.
  5. Ambec, S. & Ehlers, L., 2007. "Cooperation and equity in the river sharing problem," Working Papers 200705, Grenoble Applied Economics Laboratory (GAEL).
  6. 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.
  7. Marco Mariotti & Antonio Villar, 2005. "The Nash rationing problem," International Journal of Game Theory, Springer, vol. 33(3), pages 367-377, 09.
  8. Harold Houba, 2008. "Computing Alternating Offers And Water Prices In Bilateral River Basin Management," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 10(03), pages 257-278.
  9. Rodica Branzei & Giulio Ferrari & Vito Fragnelli & Stef Tijs, 2008. "A Flow Approach to Bankruptcy Problems," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 2(2), pages 146-153, September.
  10. Hendrickx, R.L.P., 2004. "Cooperation and Allocation," Open Access publications from Tilburg University urn:nbn:nl:ui:12-129350, Tilburg University.
  11. Mitsuo Suzuki & Mikio Nakayama, 1976. "The Cost Assignment of the Cooperative Water Resource Development: A Game Theoretical Approach," Management Science, INFORMS, vol. 22(10), pages 1081-1086, June.
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Cited by:
  1. Jorge Alcalde-Unzu & María Gómez-Rúa & Elena Molis, 2013. "Sharing the costs of cleaning a river: the Upstream Responsibility rule," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 1301, Departamento de Economía - Universidad Pública de Navarra.

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