Decentralized mechanisms for river sharing

TY - JOUR

T1 - Decentralized mechanisms for river sharing

AU - Gudmundsson, Jens

AU - Hougaard, Jens Leth

AU - Ko, Chiu Yu

PY - 2019

Y1 - 2019

N2 - 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.

AB - 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.

KW - Bargaining

KW - Consistency

KW - Decentralized mechanism

KW - Efficient allocation

KW - Implementation

KW - River sharing

U2 - 10.1016/j.jeem.2019.01.004

DO - 10.1016/j.jeem.2019.01.004

M3 - Journal article

AN - SCOPUS:85060708072

SN - 0095-0696

VL - 94

SP - 67

EP - 81

JO - Journal of Environmental Economics and Management

JF - Journal of Environmental Economics and Management

ER -