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Fair agreements for sharing international rivers with multiple springs and externalities

  • van den Brink, René
  • van der Laan, Gerard
  • Moes, Nigel

We consider the problem of sharing water among agents located along a river. Each agent's benefit depends on the amount of water consumed. An allocation of water is efficient when it maximizes total benefits. To sustain an efficient water allocation the agents can compensate each other by monetary transfers. Every water allocation and transfer schedule yield a welfare distribution, where an agent's utility equals its benefit plus (possibly negative) monetary transfer. The problem of finding a fair welfare distribution can be modeled by a cooperative game. We consider river situations with satiable agents and multiple springs. We propose the class of weighted hierarchical solutions, including the downstream incremental solution of Ambec and Sprumont (2002, [3]), as a class of solutions satisfying the ‘Territorial Integration of all Basin States’ principle for sharing water of international rivers. When all agents have increasing benefit functions, every weighted hierarchical solution is core-stable. In case of satiation points, every weighted hierarchical solution is independent of the externalities.

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Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 63 (2012)
Issue (Month): 3 ()
Pages: 388-403

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Handle: RePEc:eee:jeeman:v:63:y:2012:i:3:p:388-403
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622870

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  1. repec:ner:tilbur:urn:nbn:nl:ui:12-195976 is not listed on IDEAS
  2. AMBEC, Steve & SPRUMONT, Yves, 2000. "Sharing a River," Cahiers de recherche 2000-08, Universite de Montreal, Departement de sciences economiques.
  3. Herings,Jean-Jacques & Laan,Gerard,van der & Talman,Dolf, 2004. "The Socially Stable Core in Structured Transferable Utility Games," Research Memorandum 015, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
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  8. Macho-Stadler, Ines & Perez-Castrillo, David & Wettstein, David, 2007. "Sharing the surplus: An extension of the Shapley value for environments with externalities," Journal of Economic Theory, Elsevier, vol. 135(1), pages 339-356, July.
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  12. D. Kilgour & Ariel Dinar, 2001. "Flexible Water Sharing within an International River Basin," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 18(1), pages 43-60, January.
  13. M. J. Albizuri & J. Arin & J. Rubio, 2005. "An Axiom System For A Value For Games In Partition Function Form," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 63-72.
  14. René Brink & Gerard Laan & Valeri Vasil’ev, 2007. "Component efficient solutions in line-graph games with applications," Economic Theory, Springer, vol. 33(2), pages 349-364, November.
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  17. Anna Khmelnitskaya, 2010. "Values for rooted-tree and sink-tree digraph games and sharing a river," Theory and Decision, Springer, vol. 69(4), pages 657-669, October.
  18. Ambec, Stefan & Ehlers, Lars, 2008. "Sharing a river among satiable agents," Games and Economic Behavior, Elsevier, vol. 64(1), pages 35-50, September.
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