Computing alternating offers and water prices in bilateral river basin mangagement

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    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. © 2008 World Scientific Publishing Company.
    Original languageEnglish
    Pages (from-to)257-278
    JournalInternational Game Theory Review
    Publication statusPublished - 2008


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