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Promotion of cooperation when benefits come in the future: a water transfer case

Author

Listed:
  • Francisco Cabo

    (Universitad de Valladolid)

  • Mabel Tidball

    (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM1 - Université Montpellier 1 - UPVM - Université Paul-Valéry - Montpellier 3 - INRA - Institut National de la Recherche Agronomique - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier)

Abstract

This paper presents a two-regime differential game, with a first period in which two countries cooperate in a joint investment project to construct a specific infrastructure. This period ends when the infrastructure is finished, which serves to increase each player's welfarein a subsequent non-cooperative game played by the two countries thereafter. We define an imputation distribution procedure (IDP) to share the investment costs during cooperation according to each player' future benefits. We prove that the IDP is time consistent if at any time within the cooperative period each country's share on the surplus to go is equal to or converges towards the country's relative gains from the existence of the infrastructure (realized in the subsequent non-cooperative period). Furthermore, we obtain the instantaneous side-payment scheme which makes the IDP feasible. The mechanism is studied for a joint investment project to build a water canal to transfer water between a surplus and a deficit river basin.

Suggested Citation

  • Francisco Cabo & Mabel Tidball, 2017. "Promotion of cooperation when benefits come in the future: a water transfer case," Post-Print hal-01594547, HAL.
    • Handle: RePEc:hal:journl:hal-01594547
    DOI: 10.1016/j.reseneeco.2016.12.001
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    Cited by:

    1. Francisco Cabo & Mabel Tidball, 2022. "Cooperation in a Dynamic Setting with Asymmetric Environmental Valuation and Responsibility," Dynamic Games and Applications, Springer, vol. 12(3), pages 844-871, September.
    2. 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.

    More about this item

    Keywords

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    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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