Computing Alternating Offers and Water Prices in Bilateral River Basin Management
International Game Theory Review, Vol. 10, Issue 3, pp. 257-278, 2008
Posted: 30 Oct 2009
There are 2 versions of this paper
Computing Alternating Offers and Water Prices in Bilateral River Basin Management
Date Written: September 2008
Abstract
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.
Keywords: Bilateral river basin management, alternating offers, computation, water prices, walrasian equilibrium, second welfare theorem, property rights, non-transferable utility C72, C78, D50, D58
JEL Classification: C72, C78, D50, D58
Suggested Citation: Suggested Citation