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Sustainable Agreements on Stochastic River Flow

Author

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  • Harold Houba

    (VU University Amsterdam)

  • Erik Ansink

    (VU University Amsterdam)

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 analyze whether water allocation agreements can be self-enforcing, or sustainable. We do so using an infinitely-repeated sequential game that we apply to several classes of agreements.To derive our main results we apply the Folk Theorem to the river sharing problem using the equilibrium concepts of subgame-perfect equilibrium and renegotiation-proof equilibrium. We show that, given the upstream-downstream asymmetry, sustainable agreements allow downstream agents to reap the larger share of the benefits of cooperation.

Suggested Citation

  • Harold Houba & Erik Ansink, 2013. "Sustainable Agreements on Stochastic River Flow," Tinbergen Institute Discussion Papers 13-182/II, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20130182
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    Cited by:

    1. Marianna Khachaturyan & Karina Schoengold, 2019. "Applying Interconnected Game Theory to Analyze Transboundary Waters: A Case Study of the Kura–Araks Basin," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 5(01), pages 1-32, January.
    2. Erik Ansink & Harold Houba, 2014. "The Economics of Transboundary River Management," Tinbergen Institute Discussion Papers 14-132/VIII, Tinbergen Institute.
    3. Benjamin Ouvrard & Arnaud Reynaud & Stéphane Cezera & Alban Thomas & Dishant Jojit James & Murudaiah Shivamurthy, 2023. "Distributive Justice in the Field: How do Indian Farmers Share Water? ," Working Papers hal-04150233, HAL.
    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 & 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.
    6. 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.

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    More about this item

    Keywords

    river sharing; sustainable agreements; repeated sequential game; Folk Theorem; water allocation; renegotiation-proofness;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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