Climate Change and the Stability of Water Allocation Agreements

We analyse agreements on river water allocation between riparian countries. Besides being efficient, water allocation agreements need to be stable in order to be effective in increasing the efficiency of water use. In this paper we assess the stability of water allocation agreements using a game theoretic model. We consider the effects of climate change and the choice of a sharing rule on stability. Our results show that a decrease in mean river flow decreases the stability of an agreement, while an increased variance can have a positive or a negative effect on stability. An agreement where the downstream country is allocated a fixed amount of water has the lowest stability compared to other sharing rules. These results hold for both constant and flexible non-water transfer

Game-theoretic models of water allocation in transboundary river basins

Onderzoeksvragen zijn hoe samenwerking in waterverdeling kan worden verbeterd, en hoe internationale verdragen zo kunnen worden ontworpen dat ze niet worden verbroken. Onderliggende onderwerpen zijn de aanwezigheid van betwiste eigendomsrechten op water en het ontwerp van aantrekkelijke verdeelregels voor rivierwater. Het doel van dit proefschrift is het analyseren van waterverdeling in grensoverschrijdende rivieren met behulp van speltheoretische modellen. Dit type modellen is geschikt voor het analyseren van strategische interactie tussen landen die een rivier delen, in hun beslissingen omtrent watergebruik

Sequential sharing rules for river sharing problems

We analyse the redistribution of a resource amongst agents who have claims to the resource and who are ordered linearly. A well known example of this particular situation is the river sharing problem. We exploit the linear order of agents to transform the river sharing problem to a sequence of two-agent river sharing problems. These reduced problems are mathematically equivalent to bankruptcy problems and can therefore be solved using any bankruptcy rule. Our proposed class of solutions, that we call sequential sharing rules, solves the river sharing problem. Our approach extends the bankruptcy literature to settings with a sequential structure of both the agents and the resource to be shared. In the paper, we first characterise the class of sequential sharing rules. Subsequently, we apply sequential sharing rules based on four classical bankruptcy rules, assess their properties, provide two characterisations of one specific rule, and compare sequential sharing rules with three alternative solutions to the river sharing problem

Contested water rights

In many international river basins disputes over property rights to water lead to inefficient water allocation and a waste of resources. In this paper, we examine how contested water rights impede water trade. To show this, we use a model in which property rights to water are contested because countries have overlapping claims to water. In the model, countries decide whether to bargain over the allocation of contested river water or not. If not, they engage in conflict. In the conflict, countries spend their resources on production, which also requires water, or on fighting to secure part of the contested water. The resulting equilibrium is inefficient as both countries spend a positive amount of resources on fighting which is not productive. However, a third party may be requested to intervene in the looming conflict and allocate the water in an equitable way. The results show that for certain model parameters countries prefer not to bargain an efficient allocation, but to engage in conflict, hoping for third party intervention. The mere possibility of third party intervention may give rise to an inefficient equilibrium. Two new features of this paper are the application of a conflict model to the issue of water rights and the introduction of (overlapping) claims to non-cooperative bargaining problems

Quantifying type I and type II errors in decision-making under uncertainty: the case of GM crops

In a recent paper, Hennessy and Moschini (American Journal of Agricultural Economics 88(2): 308¿323, 2006) analyse the interactions between scientific uncertainty and costly regulatory actions. We use their model to analyse the costs of making type I and type II errors, in the context of the possible introduction of GM crops. We demonstrate that the costs of making a type I or type II error should be calculated as the difference in costs between choosing the right action immediately and choosing the right action only after the state of nature has been revealed. The importance of this result for the discussion on the precautionary principle is briefly examined

Composition properties in the river claims problem

In a river claims problem, agents are ordered linearly, and they hve both an initial water endowment as well as a claim to the total water resou8rce. We provide characterizations of two solutions to this problem, using Composition properties which have particularly relevant interpretations for the river claims problem. Specifically, these properties relate to situations where river flow is uncertain or highly variable, possibly due to climate change impacts. The only solution that satisfies all says that agents are free to use any water available on their teerritory, without concern for downstream impacts. The other solution that we assess is the "No-harm rule", an extreme interpretation of the "no-harm" principle from international water law, which implies that water is allocated with priority to downstream needs. In addition to characerizing both solutions, we show their relation to priority rules and to sequential sharing rules, and we extend our analysis to general river systems

To Value Functions or Services? An Analysis of Ecosystem Valuation Approaches

Monetary valuation of ecosystem services is a widely used approach to quantify the benefits supplied by the natural environment to society. An alternative approach is the monetary valuation of ecosystem functions, which is defined as the capacity of the ecosystem to supply services. Using two European case-study areas, this paper explores the relative advantages of the two valuation approaches. This is done using a conceptual analysis, a qualitative application, and an overall comparison of both approaches. It is concluded that both approaches can be defended on theoretical grounds, and - if properly applied - will provide the same value estimates. However, valuation of ecosystem services is preferred from a practical point of view. Because there is no one-to-one match between functions and services, researchers should be consistent in their valuation approach. To avoid overlooking or overlapping of values, valuation should either be solely based on functions, or solely based on service