Erik Ansink

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.

Hydro-economic modeling of water scarcity under global change: an application to the Gállego river basin (Spain)

Integrated approaches are needed to assess the effects of global changes on the future state of water resources at regional scales. We develop a hydro-economic model of the Gállego catchment, Spain, to assess how global change and policy options affect the catchment’s water scarcity and the economic implications to the agricultural sector. The model couples physical processes (hydrology) and regulatory and economic processes (agricultural water demand, reservoir operation). Five scenarios, covering currently ongoing changes in climatic conditions, agriculture and hydrological planning, are evaluated. Our results suggest that the scenarios’ impacts on water resources and regional agricultural income are significant. Policy responses such as investments in modernization of irrigation technology would mitigate the negative impacts of climatic change on the agricultural sector, but the implementation costs outweigh the extra regional agricultural income. Also, a planned reservoir extension project appears ineffective, even considering effects of climatic change. Although our results are site-specific, our methodology is relevant to other areas that face comparable problems of water scarcity.

INVESTMENT IN FLOOD PROTECTION MEASURES UNDER CLIMATE CHANGE UNCERTAINTY

Recent severe river flooding in Europe has triggered debates among scientists and policy-makers on future projections of flood frequency and the need for adaptive investments, such as flood protection measures. Because there exists uncertainty about the impact of climate change on flood risk, such investments require a careful analysis of expected benefits and costs. The objective of this paper is to show how climate change uncertainty affects the decision to invest in flood protection measures. We develop a model that incorporates flexible timing of investment decisions and scientific uncertainty on the extent of climate change impact. This model allows decision-makers to cope with the uncertain impact of climate change on the frequency and damage of river flood events and minimizes the risk of under- or over-investment. One of the innovative elements of our paper is that we explicitly distinguish between structural and non-structural flood protection measures. Our results show that the effects of uncertainty on the optimal initial investment depends on the cost structure of these measures which has several important implications for flood management policy.

Composition Properties in the River Claims Problem

In a river claims problem, agents are ordered linearly, and they have both an initial water endowment as well as a claim to the total water resource. 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 Composition properties is the ‘Harmon rule’ induced by the Harmon Doctrine, which says that agents are free to use any water available on their territory, 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 characterizing both solutions, we show their relation to priority rules and to sequential sharing rules, and we extend our analysis to general river systems.

Reallocating Water: An Application of Sequential Sharing Rules to Cyprus

Water scarcity has become a major constraint on economic development in many regions of the world and sectoral water reallocation is now widely recognized as an essential step toward the sustainable management of water resources. This paper offers an approach to the reallocation of water among sectors based on sequential sharing rules. An essential feature of this approach is that it takes jointly into account a multiplicity of aspects which are critical to many water reallocation problems, but have often been neglected by the theoretical literature. Such aspects include pre-existing customary (or other) rights, scarcity constraints, the chronological order of sectors’ arrivals and environmental water demand. In doing so, our framework can help achieve a solution which is not only more efficient, but also perceived as legitimate and fair. Sequential sharing rules can be used to support or complement other approaches to water allocation, including those based on water markets. Our framework is illustrated using an application to inter-sectoral water reallocation in Cyprus.

River Sharing and Water Trade

We analyse river sharing games in which a set of agents located along a river shares the available water. Using coalition theory, we find that the potential benefits of water trade may not be sufficient to make all agents in the river cooperate and acknowledge property rights as a prerequisite for trade. Specifically, a complete market for river water may not emerge if there are four or more agents along the river. Instead, a partial market may emerge where a subset of agents trades river water while other agents can take some of the river water that passes their territory.

The Economics of Transboundary River Management

We survey the economics of transboundary river water allocation, which emerged in the 1960s and has matured over the last decade due to increasing concerns over water scarcity and pollution. We outline the major approaches and pay specific attention to the strategic aspects of transboundary river water allocation. These strategic aspects are captured by employing game theory to assess the economics of transboundary river water allocation in a simple model of river sharing. This model allows us to show how conflict and cooperation over transboundary water resources may occur. It also allows us to pay specific attention to the efficiency, sustainability, and fairness of solutions to this model. We compare and contrast both cooperative and non-cooperative approaches and we relate their solutions to illustrative examples.

Understanding the economics of limited access orders : Incentives, organizations and the chronology of developments

In ‘Violence and Social Orders’, North, Wallis and Weingast highlight the need of societies to control large-scale violence. In response to this need, a variety of social orders has emerged with differing institutional, political and economic characteristics. One of these social orders is the limited access order that was prevalent in most of history and still is nowadays. Taking the conceptual framework of North et al. as a starting point, we make three advances to their analysis of limited access orders. First, we analyse the incentive structure of actors involved, using a formal model of the main interactions in a limited access order. Second, we decompose organizations into two types and analyse their respective roles. Third, we use insights from historical research to scrutinize the chronology of the rise of organizations. Jointly, this allows us to refine and substantiate the insights gained by North et al., highlight the role of organizations and place the start of relevant developments earlier in time.

Self-Enforcing Agreements on Water Allocation

Many water allocation agreements in transboundary river basins are inherently unstable. Due to stochastic river flow, agreements may be broken in case of drought. The objective of this paper is to analyse whether water allocation agreements can be self-enforcing. An agreement is modelled as the outcome of bargaining game on river water allocation. Given this agreement, the bargaining game is followed by a repeated extensive-form game in which countries decide whether or not to comply with the agreement. I assess under what conditions such agreements are self-enforcing, given stochastic river flow. The results show that, for sufficiently low discounting, every efficient agreement can be sustained in subgame perfect equilibrium. Requiring renegotiation-proofness may shrink the set of possible agreements to a unique self-enforcing agreement. The solution induced by this particular agreement implements the “downstream incremental distribution”, an axiomatic solution to water allocation that assigns all gains from cooperation to downstream countries.

Crowdfunding public goods: An experiment

We assess the impact of different crowdfunding designs on the success of crowdfunded public goods using a lab-in-the-field experiment. Our design treatments aim to increase the efficiency of crowdfunding campaigns by raising aggregate contributions and decreasing possible coordination problems that may occur when potential donors are faced with a multitude of projects seeking contributions. Amongst others, we explore the potential of seed money and the impact of the attraction effect. Using a four-day time window we implement our crowdfunding experiment using a web-based user interface with multiple threshold public goods, similar in style to conventional crowdfunding websites. We find that such alternative crowdfunding designs affect efficiency via improving coordination, and not so much via affecting total contributions. These results are confirmed in a follow-up framed field experiment with actual nature conservation projects.