Promotion of cooperation when benefits come in the future: a water transfer case

Francisco Cabo (1) , Mabel Tidball (2)

1 Universitad de Valladolid
2 LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée

This paper presents a two-regime differential game, with a first period in which two countries cooperate in a joint investment project to construct a specific infrastructure. This period ends when the infrastructure is finished, which serves to increase each player’s welfarein a subsequent non-cooperative game played by the two countries thereafter. We define an imputation distribution procedure (IDP) to share the investment costs during cooperation according to each player’ future benefits. We prove that the IDP is time consistent if at any time within the cooperative period each country’s share on the surplus to go is equal to or converges towards the country’s relative gains from the existence of the infrastructure (realized in the subsequent non-cooperative period). Furthermore, we obtain the instantaneous side-payment scheme which makes the IDP feasible. The mechanism is studied for a joint investment project to build a water canal to transfer water between a surplus and a deficit river basin.

Mots clés: théorie des jeux cooperatifs; gestion de l'eau

Domaines: Environnement et Société; Economies et finances

Francisco Cabo, Mabel Tidball. Promotion of cooperation when benefits come in the future: a water transfer case. Resource and Energy Economics, 2017, 47, pp.56-71. ⟨10.1016/j.reseneeco.2016.12.001⟩. ⟨hal-01594547⟩