Decentralized mechanisms for river sharing |
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| Institution: | 1. Department of Economics, University of Copenhagen, Denmark;2. Department of Food and Resource Economics, University of Copenhagen, Denmark;3. Department of Economics, National University Singapore, Singapore;1. School of Environmental and Rural Studies, Pontificia Universidad Javeriana, Colombia;2. Sanford School of Public Policy, Duke University, United States;3. School of Economics and Center for the Study of Security and Drugs (CESED), Universidad de Los Andes, Colombia;1. Research Economist, USDA Forest Service Pacific Southwest Research Station, USA;2. Department of Applied Economics, Oregon State University, USA;3. Bren School of Environmental Science & Management, University of California, Santa Barbara, USA;1. School of Business and Economics, Humboldt University, SpandauerStr. 1, 10178 Berlin, Germany;2. School of Public Economics and Administration, Shanghai University of Finance and Economics, 777 Guoding Road, 200433 Shanghai, China;1. MIT Sloan School, USA;2. Department of Economics and Harvard Kennedy School, Harvard University, The National Bureau of Economic Research, USA |
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| 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. |
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| Keywords: | River sharing Decentralized mechanism Efficient allocation Implementation Bargaining Consistency C72 C78 D61 D82 Q34 |
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