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Decentralized mechanisms for river sharing

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  • Gudmundsson, Jens
  • Hougaard, Jens Leth
  • Ko, Chiu Yu

Abstract

We study decentralized implementation of efficient outcomes through multilateral bargaining in the river sharing problem. We introduce a class of mechanisms in the form of two-stage games in which agents first announce consumption levels and then bargain over monetary compensations. The defining characteristic of a mechanism is the way it assigns bargaining power to agents as a consequence of their locations, inflows, and consumption decisions. We first determine which mechanisms give incentives to always allocate the water efficiently, in the sense that, regardless of the agents' benefit functions, equilibrium play always yields an efficient outcome. Among these, we take an axiomatic approach to single out three mechanisms that guarantee a fair division of the welfare gain obtained through cooperation along the river.

Suggested Citation

  • Gudmundsson, Jens & Hougaard, Jens Leth & Ko, Chiu Yu, 2019. "Decentralized mechanisms for river sharing," Journal of Environmental Economics and Management, Elsevier, vol. 94(C), pages 67-81.
    • Handle: RePEc:eee:jeeman:v:94:y:2019:i:c:p:67-81
    DOI: 10.1016/j.jeem.2019.01.004
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    Cited by:

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    2. Jens Gudmundsson & Jens Leth Hougaard, 2021. "River pollution abatement: Decentralized solutions and smart contracts," IFRO Working Paper 2021/07, University of Copenhagen, Department of Food and Resource Economics, revised Oct 2021.
    3. Weibing Li & Yongwen Yang, 2024. "The effect of environmental centralisation on productivity: Evidence from an administrative reform in China," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(2), pages 824-851, March.
    4. Gudmundsson, Jens & Hougaard, Jens Leth & Platz, Trine Tornøe, 2023. "Decentralized task coordination," European Journal of Operational Research, Elsevier, vol. 304(2), pages 851-864.
    5. Chen, Gao & Xu, Jian & Qi, Yu, 2022. "Environmental (de)centralization and local environmental governance: Evidence from a natural experiment in China," China Economic Review, Elsevier, vol. 72(C).
    6. Francesco Ciardiello & Andrea Genovese & Shucheng Luo & Antonino Sgalambro, 2023. "A game-theoretic multi-stakeholder model for cost allocation in urban consolidation centres," Annals of Operations Research, Springer, vol. 324(1), pages 663-686, May.

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    More about this item

    Keywords

    River sharing; Decentralized mechanism; Efficient allocation; Implementation; Bargaining; Consistency;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts

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