IDEAS home Printed from https://ideas.repec.org/p/fem/femwpa/2009.73.html
   My bibliography  Save this paper

Self-enforcing Agreements on Water allocation

Author

Listed:
  • Erik Ansink

    (Wageningen University)

Abstract

Many water allocation agreements in transboundary river basins are inherently unstable. Due to stochastic river flow, agreements may be broken in case of drought. The objective of this paper is to analyse whether water allocation agreements can be self-enforcing. An agreement is modelled as the outcome of bargaining game on river water allocation. Given this agreement, the bargaining game is followed by a repeated extensive-form game in which countries decide whether or not to comply with the agreement. I assess under what conditions such agreements are self-enforcing, given stochastic river flow. The results show that, for sufficiently low discounting, every efficient agreement can be sustained in subgame perfect equilibrium. Requiring renegotiation-proofness may shrink the set of possible agreements to a unique self-enforcing agreement. The solution induced by this particular agreement implements the “downstream incremental distribution”, an axiomatic solution to water allocation that assigns all gains from cooperation to downstream countries.

Suggested Citation

  • Erik Ansink, 2009. "Self-enforcing Agreements on Water allocation," Working Papers 2009.73, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2009.73
    as

    Download full text from publisher

    File URL: http://www.feem.it/userfiles/attach/Publication/NDL2009/NDL2009-073.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lucia De Stefano & James Duncan & Shlomi Dinar & Kerstin Stahl & Kenneth M Strzepek & Aaron T Wolf, 2012. "Climate change and the institutional resilience of international river basins," Journal of Peace Research, Peace Research Institute Oslo, vol. 49(1), pages 193-209, January.
    2. Gauthier, C. & Poitevin, M., 1994. "Using Ex-ante Payments in Self-Enforcing Risk-Sharing Contracts," Cahiers de recherche 9402, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    3. Jesús Gastélum & Juan Valdés & Steven Stewart, 2009. "A Decision Support System to Improve Water Resources Management in the Conchos Basin," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 23(8), pages 1519-1548, June.
    4. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, November.
    5. Bhat, Mahadev G. & Huffaker, Ray G., 2007. "Management of a transboundary wildlife population: A self-enforcing cooperative agreement with renegotiation and variable transfer payments," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 54-67, January.
    6. Mark Giordano & Alena Drieschova & James Duncan & Yoshiko Sayama & Lucia De Stefano & Aaron Wolf, 2014. "A review of the evolution and state of transboundary freshwater treaties," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 14(3), pages 245-264, September.
    7. Bergin James & MacLeod W. Bentley, 1993. "Efficiency and Renegotiation in Repeated Games," Journal of Economic Theory, Elsevier, vol. 61(1), pages 42-73, October.
    8. Ambec, S. & Ehlers, L., 2007. "Cooperation and equity in the river sharing problem," Working Papers 200705, Grenoble Applied Economics Laboratory (GAEL).
    9. van den Brink, René & van der Laan, Gerard & Moes, Nigel, 2012. "Fair agreements for sharing international rivers with multiple springs and externalities," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 388-403.
    10. Houba, Harold & van der Laan, Gerard & Zeng, Yuyu, 2014. "Asymmetric Nash Solutions in the River Sharing Problem," Strategic Behavior and the Environment, now publishers, vol. 4(4), pages 321-360, December.
    11. 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.
    12. Ambec, Stefan & Sprumont, Yves, 2002. "Sharing a River," Journal of Economic Theory, Elsevier, vol. 107(2), pages 453-462, December.
    13. Evans, Robert & Maskin, Eric, 1989. "Efficient renegotiation--proof equilibria in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 361-369, December.
    14. Quan Wen, 2002. "A Folk Theorem for Repeated Sequential Games," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 493-512.
    15. Germain, Marc & Tulkens, Henry & Magnus, Alphonse, 2010. "Dynamic core-theoretic cooperation in a two-dimensional international environmental model," Mathematical Social Sciences, Elsevier, vol. 59(2), pages 208-226, March.
    16. van Damme, Eric, 1989. "Renegotiation-proof equilibria in repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 47(1), pages 206-217, February.
    17. Farrell, Joseph & Maskin, Eric, 1989. "Renegotiation in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 327-360, December.
    18. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-396, March.
    19. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-894, Supplemen.
    20. repec:dau:papers:123456789/4879 is not listed on IDEAS
    21. Gauthier, Celine & Poitevin, Michel & Gonzalez, Patrick, 1997. "Ex Ante Payments in Self-Enforcing Risk-Sharing Contracts," Journal of Economic Theory, Elsevier, vol. 76(1), pages 106-144, September.
    22. 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.
    23. Erik Ansink & Arjan Ruijs, 2008. "Climate Change and the Stability of Water Allocation Agreements," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(2), pages 249-266, October.
    24. Lynne Lewis Bennett & Charles W. Howe & James Shope, 2000. "The Interstate River Compact as a Water Allocation Mechanism: Efficiency Aspects," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 1006-1015.
    25. Carraro, Carlo & Marchiori, Carmen & Sgobbi, Alessandra, 2007. "Negotiating on water: insights from non-cooperative bargaining theory," Environment and Development Economics, Cambridge University Press, vol. 12(02), pages 329-349, April.
    26. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-554, May.
    27. Ansink, Erik & Weikard, Hans-Peter, 2009. "Contested water rights," European Journal of Political Economy, Elsevier, vol. 25(2), pages 247-260, June.
    28. Sylvain Beal & Amandine Ghintran & Eric Remila & Philippe Solal, 2013. "The River Sharing Problem: A Survey," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 15(03), pages 1-19.
    29. Barret, Scott & DEC, 1994. "Conflict and cooperation in managing international water resources," Policy Research Working Paper Series 1303, The World Bank.
    30. Busch, Lutz-Alexander & Wen, Quan, 1995. "Perfect Equilibria in Negotiation Model," Econometrica, Econometric Society, vol. 63(3), pages 545-565, May.
    31. 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.
    32. Rubinstein Ariel & Wolinsky Asher, 1995. "Remarks on Infinitely Repeated Extensive-Form Games," Games and Economic Behavior, Elsevier, vol. 9(1), pages 110-115, April.
    33. Ansink, Erik & Houba, Harold, 2012. "Market power in water markets," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 237-252.
    34. Douglas Bernheim, B. & Ray, Debraj, 1989. "Collective dynamic consistency in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 295-326, December.
    35. Erik Ansink & Hans-Peter Weikard, 2015. "Composition properties in the river claims problem," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 44(4), pages 807-831, April.
    36. Yoon, Kiho, 2001. "A Folk Theorem for Asynchronously Repeated Games," Econometrica, Econometric Society, vol. 69(1), pages 191-200, January.
    37. Sorin Sylvain, 1995. "A Note on Repeated Extensive Games," Games and Economic Behavior, Elsevier, vol. 9(1), pages 116-123, April.
    38. 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.
    39. Stephen Polasky & Nori Tarui & Gregory Ellis & Charles Mason, 2006. "Cooperation in the commons," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(1), pages 71-88, September.
    40. van Damme, Eric, 1989. "Renegotiation-proof equilibria in repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 47(1), pages 206-217, February.
    41. David McEvoy & John Stranlund, 2009. "Self-enforcing International Environmental Agreements with Costly Monitoring for Compliance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 42(4), pages 491-508, April.
    42. René Brink & Gerard Laan & Valeri Vasil’ev, 2007. "Component efficient solutions in line-graph games with applications," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(2), pages 349-364, 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. repec:eee:eecrev:v:99:y:2017:i:c:p:43-55 is not listed on IDEAS
    2. Kong, Wen & Knapp, Keith C., 2014. "Economic and Political Equilibrium for a Renewable Natural Resource with International Trade," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170591, Agricultural and Applied Economics Association.
    3. Erik Ansink & Hans-Peter Weikard, 2015. "Composition properties in the river claims problem," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 44(4), pages 807-831, April.
    4. Mason, Charles F. & Polasky, Stephen & Tarui, Nori, 2017. "Cooperation on climate-change mitigation," European Economic Review, Elsevier, vol. 99(C), pages 43-55.
    5. Erik Ansink & Harold Houba, 2014. "The Economics of Transboundary River Management," Tinbergen Institute Discussion Papers 14-132/VIII, Tinbergen Institute.

    More about this item

    Keywords

    Self-Enforcing Agreement; Repeated Extensive-Form Game; Water Allocation; Renegotiation-Proofness;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:fem:femwpa:2009.73. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (barbara racah). General contact details of provider: http://edirc.repec.org/data/feemmit.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.