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Computing Alternating Offers And Water Prices In Bilateral River Basin Management



    (Department of Econometrics, Vrije Universiteit, De Boelelaan 1105, Amsterdam, 1081 HV, Netherlands)

This contribution addresses the fundamental critique in Dinar et al. [1992, Theory and Decision 32] on the use of game theory in river basin management: People are reluctant to monetary transfers unrelated to water prices and game theoretic solutions impose a computational burden. For the bilateral alternating-offers model, a single optimization program significantly reduces the computational burden. Furthermore, water prices and property rights result from exploiting the Second Welfare Theorem. Both issues are discussed and applied to a bilateral version of the theoretical river basin model in Ambec and Sprumont [2002, Journal of Economic Theory 107]. Directions for future research are provided.

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Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Game Theory Review.

Volume (Year): 10 (2008)
Issue (Month): 03 ()
Pages: 257-278

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Handle: RePEc:wsi:igtrxx:v:10:y:2008:i:03:p:257-278
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