IDEAS home Printed from https://ideas.repec.org/a/spr/waterr/v27y2013i5p1457-1472.html
   My bibliography  Save this article

Pricing and Water Resource Allocation Scheme for the South-to-North Water Diversion Project in China

Author

Listed:
  • Zhisong Chen
  • Huimin Wang
  • Xiangtong Qi

Abstract

The eastern route of the South-to-North Water Diversion (SNWD-ER) project is a massive-scale interbasin system to transfer water from the Yangtze River to North China. With the infrastructure construction close to completion, the project is now faced with many complicated operations management problem at different levels. The problems are unique in that, on the one hand, the project is expected to be financially self-sustainable by charging water usages, and on the other hand, the water price is regulated for its nature as a social product. One such problem is to achieve a rational water allocation among different users by appropriate pricing schemes. In this paper, we study how to use a two-tier pricing scheme to balance the water allocation by using a Stackelberg game model. From the study, we find that (1) the Stackelberg game always has equilibrium solutions to balance the benefit of every party in the system, which implies that the two-tier pricing scheme can effectively coordinate the water allocation; (2) the two-tier pricing scheme can also result in multiple desirable by-products such as encouraging the implementation of water saving mechanism and giving the local water users certain priority; and (3) the government can adjust the pricing parameters to control and balance the profit of every party. As such we conclude that the two-tier pricing scheme is an effective way that integrates both the government control and market powers to ensure the public interest and the economic benefit, which is suitable for SNWD-ER project. Copyright Springer Science+Business Media Dordrecht 2013

Suggested Citation

  • Zhisong Chen & Huimin Wang & Xiangtong Qi, 2013. "Pricing and Water Resource Allocation Scheme for the South-to-North Water Diversion Project in China," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(5), pages 1457-1472, March.
    • Handle: RePEc:spr:waterr:v:27:y:2013:i:5:p:1457-1472
    DOI: 10.1007/s11269-012-0248-1
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11269-012-0248-1
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11269-012-0248-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hugh Sibly, 2006. "Urban Water Pricing," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 13(1), pages 17-30.
    2. Chun Xia & Claudia Pahl-Wostl, 2012. "The Development of Water Allocation Management in The Yellow River Basin," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(12), pages 3395-3414, September.
    3. Viaggi, D. & Raggi, M. & Bartolini, F. & Gallerani, V., 2010. "Designing contracts for irrigation water under asymmetric information: Are simple pricing mechanisms enough?," Agricultural Water Management, Elsevier, vol. 97(9), pages 1326-1332, September.
    4. Tsur, Yacov & Dinar, Ariel, 1997. "The Relative Efficiency and Implementation Costs of Alternative Methods for Pricing Irrigation Water," The World Bank Economic Review, World Bank, vol. 11(2), pages 243-262, May.
    5. Hugh Sibly, 2006. "Efficient Urban Water Pricing," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 39(2), pages 227-237, June.
    6. Dono, Gabriele & Giraldo, Luca & Severini, Simone, 2010. "Pricing of irrigation water under alternative charging methods: Possible shortcomings of a volumetric approach," Agricultural Water Management, Elsevier, vol. 97(11), pages 1795-1805, November.
    7. Julie A. Hewitt & W. Michael Hanemann, 1995. "A Discrete/Continuous Choice Approach to Residential Water Demand under Block Rate Pricing," Land Economics, University of Wisconsin Press, vol. 71(2), pages 173-192.
    8. Byrnes, Joel & Crase, Lin & Dollery, Brian, 2006. "Regulation versus pricing in urban water policy: the case of the Australian National Water Initiative," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 1-13, September.
    9. Mehmet Kucukmehmetoglu, 2009. "A Game Theoretic Approach to Assess the Impacts of Major Investments on Transboundary Water Resources: The Case of the Euphrates and Tigris," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 23(15), pages 3069-3099, December.
    10. Xueqin Zhu & Ekko Ierland, 2012. "Economic Modelling for Water Quantity and Quality Management: A Welfare Program Approach," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(9), pages 2491-2511, July.
    11. Gomez-Limon, Jose A. & Riesgo, Laura, 2004. "Irrigation water pricing: differential impacts on irrigated farms," Agricultural Economics, Blackwell, vol. 31(1), pages 47-66, July.
    12. Weiwei Shao & Dawen Yang & Heping Hu & Kenji Sanbongi, 2009. "Water Resources Allocation Considering the Water Use Flexible Limit to Water Shortage—A Case Study in the Yellow River Basin of China," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 23(5), pages 869-880, March.
    13. Jean-Daniel Rinaudo & Noémie Neverre & Marielle Montginoul, 2012. "Simulating the Impact of Pricing Policies on Residential Water Demand: A Southern France Case Study," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(7), pages 2057-2068, May.
    14. Jianshi Zhao & Zhongjing Wang & Daoxi Wang & Dangxian Wang, 2009. "Evaluation of Economic and Hydrologic Impacts of Unified Water Flow Regulation in the Yellow River Basin," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 23(7), pages 1387-1401, May.
    15. H. Lu & G. Huang & L. He, 2012. "Simulation-Based Inexact Rough-Interval Programming for Agricultural Irrigation Management: A Case Study in the Yongxin County, China," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(14), pages 4163-4182, November.
    16. Mohammad Nikoo & Reza Kerachian & Hamed Poorsepahy-Samian, 2012. "An Interval Parameter Model for Cooperative Inter-Basin Water Resources Allocation Considering the Water Quality Issues," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(11), pages 3329-3343, September.
    17. D. Haro & J. Paredes & A. Solera & J. Andreu, 2012. "A Model for Solving the Optimal Water Allocation Problem in River Basins with Network Flow Programming When Introducing Non-Linearities," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(14), pages 4059-4071, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Giri R. Kattel & Wenxiu Shang & Zhongjing Wang & John Langford, 2019. "China’s South-to-North Water Diversion Project Empowers Sustainable Water Resources System in the North," Sustainability, MDPI, vol. 11(13), pages 1-12, July.
    2. Shawei He & Keith Hipel & D. Kilgour, 2014. "Water Diversion Conflicts in China: A Hierarchical Perspective," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(7), pages 1823-1837, May.
    3. Mengjing Guo & Tiegang Zhang & Jing Li & Zhanbin Li & Guoce Xu & Rui Yang, 2019. "Reducing Nitrogen and Phosphorus Losses from Different Crop Types in the Water Source Area of the Danjiang River, China," IJERPH, MDPI, vol. 16(18), pages 1-17, September.
    4. Hanfang Xu & Zhen Yao, "undated". "The impact of the south-to-north water diversion project on the usage of water-saving irrigation machinery," Review of Socio - Economic Perspectives 202216, Reviewsep.
    5. Kaiyong Wang & Pengyan Zhang & Bo Pang, 2018. "Process and Mechanism of Agricultural Irrigation Benefit Allocation Coefficient Based on Emergy Analysis—A Case Study of Henan, China," Sustainability, MDPI, vol. 10(12), pages 1-15, November.
    6. Zhe Cheng & Yuntong Zhao & Tao Song & Le Cheng & Wenbin Wang, 2023. "White Elephant or Golden Goose? An Assessment of Middle Route of the South-to-North Water Diversion Project from the Perspective of Regional Water Use Efficiency," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 37(2), pages 819-834, January.
    7. Liang Zhang & Sisi Li & Hugo A. Loáiciga & Yanhua Zhuang & Yun Du, 2015. "Opportunities and challenges of interbasin water transfers: a literature review with bibliometric analysis," Scientometrics, Springer;Akadémiai Kiadó, vol. 105(1), pages 279-294, October.
    8. Wenyi Du & Yubing Fan & Xiaowo Tang, 2016. "Two-part pricing contracts under competition: the South-to-North Water Transfer Project supply chain system in China," International Journal of Water Resources Development, Taylor & Francis Journals, vol. 32(6), pages 895-911, November.
    9. Zhao, Siwei & Liu, Weidong & Zhu, Mengyuan & Ma, Yanfang & Li, Zongmin, 2021. "A priority-based multi-objective framework for water resources diversion and allocation in the middle route of the South-to-North Water Diversion Project," Socio-Economic Planning Sciences, Elsevier, vol. 78(C).
    10. Wolfgang Krinner, 2014. "Financial Analysis of the Spanish Water Sector," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(9), pages 2471-2490, July.
    11. Olga A. CHERNOVA, 2018. "Information Risks in Water Resources Management of a Region," Upravlenets, Ural State University of Economics, vol. 9(5), pages 40-47, October.
    12. Mengdi Li & Yaoping Cui & Yaochen Qin & Zhifang Shi & Nan Li & Xiaoyan Liu & Yadi Run & Oliva Gabriel Chubwa, 2021. "Estimating the Impact of Ecological Migrants on the South-to-North Water Diversion in China," IJERPH, MDPI, vol. 18(23), pages 1-16, November.
    13. Wenyi Du & Yubing Fan & Lina Yan, 2018. "Pricing Strategies for Competitive Water Supply Chains under Different Power Structures: An Application to the South-to-North Water Diversion Project in China," Sustainability, MDPI, vol. 10(8), pages 1-13, August.
    14. Zhisong Chen & Shong-Iee Ivan Su & Huimin Wang, 2019. "Inter-Basin Water Transfer Supply Chain Equilibrium and Coordination: A Social Welfare Maximization Perspective," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 33(7), pages 2577-2598, May.
    15. Sheng, Jichuan & Webber, Michael, 2017. "Incentive-compatible payments for watershed services along the Eastern Route of China’s South-North Water Transfer Project," Ecosystem Services, Elsevier, vol. 25(C), pages 213-226.
    16. Zhen Zhou & Meijia Zhang & Xiaohui Yu & Xijun He & Kang Wang & Quan Shao & Jie Wang & Hongxia Sun, 2019. "PM 2.5 Cooperative Control with Fuzzy Cost and Fuzzy Coalitions," IJERPH, MDPI, vol. 16(7), pages 1-14, April.
    17. Zhisong Chen & Keith C.K. Cheung & Manyi Tan, 2019. "Inter-Basin Water Transfer Supply Chain Coordination with Ramsey Pricing," IJERPH, MDPI, vol. 16(19), pages 1-22, September.
    18. Meng Liu & Wenwen Ding & Yali Lu, 2022. "Collaborative Management of a Sustainable Supply Chain in a Water Diversion Project," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 36(8), pages 2665-2683, June.
    19. Zhisong Chen & Lingling Pei, 2018. "Inter-Basin Water Transfer Green Supply Chain Equilibrium and Coordination under Social Welfare Maximization," Sustainability, MDPI, vol. 10(4), pages 1-28, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sheila M. Olmstead, 2010. "The Economics of Managing Scarce Water Resources," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(2), pages 179-198, Summer.
    2. Hugh Sibly & Richard Tooth, 2014. "The consequences of using increasing block tariffs to price urban water," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(2), pages 223-243, April.
    3. Prakashan Veettil & Stijn Speelman & Guido Huylenbroeck, 2013. "Estimating the Impact of Water Pricing on Water Use Efficiency in Semi-arid Cropping System: An Application of Probabilistically Constrained Nonparametric Efficiency Analysis," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(1), pages 55-73, January.
    4. Jeffrey A. Edwards & Tara R. Wade & Mark L. Burkey & R. Gary Pumphrey, 2014. "Forecasting the Public's Acceptability of Municipal Water Regulation and Price Rationing for Communities on the Ogallala Aquifer," Journal of Economic Insight, Missouri Valley Economic Association, vol. 40(1), pages 1-30.
    5. Buchholz, Matthias & Musshoff, Oliver, 2014. "The role of weather derivatives and portfolio effects in agricultural water management," Agricultural Water Management, Elsevier, vol. 146(C), pages 34-44.
    6. Henrique Monteiro, 2010. "Residential Water Demand in Portugal: checking for efficiency-based justifications for increasing block tariffs," Working Papers Series 1 ercwp0110, ISCTE-IUL, Business Research Unit (BRU-IUL).
    7. Shawei He & Keith Hipel & D. Kilgour, 2014. "Water Diversion Conflicts in China: A Hierarchical Perspective," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(7), pages 1823-1837, May.
    8. Olmstead, Sheila & Stavins, Robert, 2008. "Comparing Price and Non-Price Approaches to Urban Water Conservation," Working Paper Series rwp08-034, Harvard University, John F. Kennedy School of Government.
    9. Armaghan Abed-Elmdoust & Reza Kerachian, 2012. "Water Resources Allocation Using a Cooperative Game with Fuzzy Payoffs and Fuzzy Coalitions," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(13), pages 3961-3976, October.
    10. Humblot, Pierre & Jayet, Pierre-Alain & Petsakos, Athanasios, 2017. "Farm-level bio-economic modeling of water and nitrogen use: Calibrating yield response functions with limited data," Agricultural Systems, Elsevier, vol. 151(C), pages 47-60.
    11. Xunzhou Ma & Shiqiu Zhang & Quan Mu, 2014. "How Do Residents Respond to Price under Increasing Block Tariffs? Evidence from Experiments in Urban Residential Water Demand in Beijing," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(14), pages 4895-4909, November.
    12. Rust, Steven & Silberberg, Ben & Turner, Emma & Sharp, Basil, 2020. "Investigating the value of keeping options open for water infrastructure in the Lower Hunter, New South Wales," Utilities Policy, Elsevier, vol. 62(C).
    13. Gallego-Ayala, Jordi & Gómez-Limón Rodríguez, José A., 2010. "Evaluación del impacto de la tarifación del agua de riego sobre la sostenibilidad del regadío: una aproximación a través de indicadores sintéticos/Impact assessment of irrigation water pricing in irri," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 28, pages 375-404, Agosto.
    14. Hang Zheng & Clive Lyle & Zhongjing Wang, 2014. "A Comparative Study of Flexibility in Water Allocation in the Context of Hydrologic Variability," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(3), pages 785-800, February.
    15. Mónica Maldonado-Devis & Vicent Almenar-Llongo, 2021. "A Panel Data Estimation of Domestic Water Demand with IRT Tariff Structure: The Case of the City of Valencia (Spain)," Sustainability, MDPI, vol. 13(3), pages 1-26, January.
    16. Rui Fragoso & Carlos Marques, 2013. "The Economic Impact of Alternative Water Pricing Policies in Alentejo Region," CEFAGE-UE Working Papers 2013_02, University of Evora, CEFAGE-UE (Portugal).
    17. Buchholz, Matthias & Holst, Gesa & Musshoff, Oliver, 2015. "Water and irrigation policy impact assessment using business simulation games: evidence from northern Germany," Department of Agricultural and Rural Development (DARE) Discussion Papers 260781, Georg-August-Universitaet Goettingen, Department of Agricultural Economics and Rural Development (DARE).
    18. Productivity Commission, 2008. "Towards Urban Water Reform: A Discussion Paper," Research Papers 0801, Productivity Commission, Government of Australia.
    19. Aina, Ifedotun Victor & Thiam, Djiby Racine & Dinar, Ariel, 2023. "Substitution of piped water and self-supplied groundwater: The case of residential water in South Africa," Utilities Policy, Elsevier, vol. 80(C).
    20. Hugh Sibly & Richard Tooth, 2008. "Bringing competition to urban water supply ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(3), pages 217-233, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:waterr:v:27:y:2013:i:5:p:1457-1472. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.