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Trading water along a river

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  • Wang, Yuntong

Abstract

A set of agents is located along a river. Each agent consumes certain amount of water he receives from his part of the river basin and may sell certain amount to his downstream agent if it is mutually beneficial. Water trading is restricted to two neighboring agents and an agent can only pass water to his downstream agent. We ask if this restricted trade to neighboring agents can implement an efficient allocation of water. We show that the efficient allocation of water can be achieved through the process of downstream bilateral trading. Specifically, we show that this one way "downstream" trading process implements the unique efficient allocation as well as a welfare distribution. We also show that the welfare distribution is in the core of the associated game of the problem. Moreover, we show that the coalition of agents upstream any agent obtains more welfare with the bilateral trading than with the downstream incremental distribution proposed by Ambec and Sprumont (2002) and less than with the upstream incremental distribution proposed by (Ambec and Ehlers, 2008a) and (Ambec and Ehlers, 2008b).

Suggested Citation

  • Wang, Yuntong, 2011. "Trading water along a river," Mathematical Social Sciences, Elsevier, vol. 61(2), pages 124-130, March.
  • Handle: RePEc:eee:matsoc:v:61:y:2011:i:2:p:124-130
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    References listed on IDEAS

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    1. Ambec, Stefan & Ehlers, Lars, 2008. "Sharing a river among satiable agents," Games and Economic Behavior, Elsevier, vol. 64(1), pages 35-50, September.
    2. Ambec, Stefan & Sprumont, Yves, 2002. "Sharing a River," Journal of Economic Theory, Elsevier, vol. 107(2), pages 453-462, December.
    3. Dinar, Ariel & Wolf, Aaron, 1994. "International Markets for Water and the Potential for Regional Cooperation: Economic and Political Perspectives in the Western Middle East," Economic Development and Cultural Change, University of Chicago Press, vol. 43(1), pages 43-66, October.
    4. Barret, Scott & DEC, 1994. "Conflict and cooperation in managing international water resources," Policy Research Working Paper Series 1303, The World Bank.
    5. 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.
    6. Stefan Ambec, 2008. "Sharing a resource with concave benefits," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 31(1), pages 1-13, June.
    7. Ambec, S. & Ehlers, L., 2007. "Cooperation and equity in the river sharing problem," Working Papers 200705, Grenoble Applied Economics Laboratory (GAEL).
    8. Giannias, Dimitrios A. & Lekakis, Joseph N., 1997. "Policy analysis for an amicable, efficient and sustainable inter-country fresh water resource allocation," Ecological Economics, Elsevier, vol. 21(3), pages 231-242, June.
    9. Murgai, Rinku & Winters, Paul & Sadoulet, Elisabeth & Janvry, Alain de, 2002. "Localized and incomplete mutual insurance," Journal of Development Economics, Elsevier, vol. 67(2), pages 245-274, April.
    10. D. Kilgour & Ariel Dinar, 2001. "Flexible Water Sharing within an International River Basin," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 18(1), pages 43-60, January.
    11. Greenberg, Joseph & Weber, Shlomo, 1986. "Strong tiebout equilibrium under restricted preferences domain," Journal of Economic Theory, Elsevier, vol. 38(1), pages 101-117, February.
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    Citations

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    Cited by:

    1. António Osório, 2017. "A Sequential Allocation Problem: The Asymptotic Distribution of Resources," Group Decision and Negotiation, Springer, vol. 26(2), pages 357-377, March.
    2. Grundel, S., 2015. "Essays on cooperation in resource allocation and scheduling," Other publications TiSEM c2d78915-6b6f-4f8b-b601-0, Tilburg University, School of Economics and Management.
    3. René van den Brink & Simin He & Jia-Ping Huang, 2015. "Polluted River Problems and Games with a Permission Structure," Tinbergen Institute Discussion Papers 15-108/II, Tinbergen Institute.
    4. Erik Ansink & Michael Gengenbach & Hans-Peter Weikard, 2012. "River Sharing and Water Trade," Working Papers 2012.17, Fondazione Eni Enrico Mattei.
    5. Rémy Delille & Jean-Christophe Pereau, 2014. "The Seawall Bargaining Game," Games, MDPI, Open Access Journal, vol. 5(2), pages 1-13, June.
    6. Osório, António (António Miguel), 2016. "A Sequential Allocation Problem: The Asymptotic Distribution of Resources," Working Papers 2072/266574, Universitat Rovira i Virgili, Department of Economics.
    7. Grundel, S. & Borm, P.E.M. & Hamers, H.J.M., 2013. "Resource Allocation Problems with Concave Reward Functions," Discussion Paper 2013-070, Tilburg University, Center for Economic Research.
    8. Ambec, Stefan & Dinar, Ariel & McKinney, Daene, 2013. "Water sharing agreements sustainable to reduced flows," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 639-655.
    9. René Brink & Arantza Estévez-Fernández & Gerard Laan & Nigel Moes, 2014. "Independence of downstream and upstream benefits in river water allocation problems," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 43(1), pages 173-194, June.
    10. Hu Lu & Yuntong Wang, 2014. "Efficient trading on a network with incomplete information," Working Papers 1405, University of Windsor, Department of Economics.
    11. Alcalde-Unzu, Jorge & Gómez-Rúa, María & Molis, Elena, 2015. "Sharing the costs of cleaning a river: the Upstream Responsibility rule," Games and Economic Behavior, Elsevier, vol. 90(C), pages 134-150.
    12. Gerard van der Laan & Nigel Moes, 2012. "Transboundary Externalities and Property Rights: An International River Pollution Model," Tinbergen Institute Discussion Papers 12-006/1, Tinbergen Institute.
    13. 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.
    14. Ambec, Stefan & Dinar, Ariel & McKinney, Daene, 2011. "Fixed Water Sharing Agreements Sustainable to Drought," TSE Working Papers 11-270, Toulouse School of Economics (TSE).
    15. Baomin Dong & Debing Ni & Yuntong Wang, 2012. "Sharing a Polluted River Network," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 53(3), pages 367-387, November.
    16. Li, Y.P. & Liu, J. & Huang, G.H., 2014. "A hybrid fuzzy-stochastic programming method for water trading within an agricultural system," Agricultural Systems, Elsevier, vol. 123(C), pages 71-83.
    17. Erik Ansink & Harold Houba, 2014. "The Economics of Transboundary River Management," Tinbergen Institute Discussion Papers 14-132/VIII, Tinbergen Institute.
    18. Jorge Alcalde-Unzu & Maria Gomez-Rua & Elena Molis, 2018. "Allocating the costs of cleaning a river; estimating responsibilities versus incentive compatibility," ThE Papers 18/02, Department of Economic Theory and Economic History of the University of Granada..
    19. Osorio, Antonio, 2014. "A Sequential Allocation Problem: The Asymptotic Distribution of Resources," MPRA Paper 56690, University Library of Munich, Germany.

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