RT info:eu-repo/semantics/article
T1 Dynamic management of water transfer between two interconnected river basins
A1 Cabo García, Francisco José
A1 Erdlenbruch, Katrin
A1 Tidball, Mabel
K1 Environmental Economics
K1 Differential games
K1 Inter-basin water transfer
K1 bilateral monopoly
K1 environmental constraints
K1 differential games
K1 open-loop information
K1 feedback strategies
AB This paper analyzes the dynamic interaction between two regions with interconnectedriver basins. Precipitation is higher in one river-basin while water productivity is higherin the other. Water transfer increases productivity in the recipient basin, but may causeenvironmental damage in the donor basin. The recipient faces a trade-off between payingthe price of the water transfer, or investing in alternative water supplies to achieve ahigher usable water capacity. We analyze the design of this transfer using a dynamicmodeling approach, which relies on non-cooperative game theory, and compare solutionswith different information structure (Nash open-loop, Nash feedback, Stackelberg) withthe social optimum. We first assume that the equilibrium between supply and demanddetermines the optimal transfer price and amount. We show that, contrary to the staticcase, in a realistic dynamic setting in which the recipient uses a feedback informationstructure the social optimum will not emerge as the equilibrium solution. We then studydifferent leadership situations in the water market and observe that the transfer amountdecreases towards a long-run value lower than the transfer under perfect competition,which in turn lays below the social optimum. In consequence, the water in the donor’sriver-basin river converges to a better quality in the presence of market power. Finally, wenumerically compare our results to the Tagus-Segura water transfer described in Ballestero(2004). Welfare gains are compared for the different scenarios. We show that in all dynamicsettings, the long-run transfer amount is lower than in Ballestero’s static model. Further,we show that the long-run price settles at a lower level than in Ballestero’s model, but isstill higher than the average cost-based price determined by the Spanish government.
PB Elsevier
SN 0928-7655
YR 2014
FD 2014
LK http://uvadoc.uva.es/handle/10324/32349
UL http://uvadoc.uva.es/handle/10324/32349
LA spa
NO Resource and Energy Economics, 37, pp. 17-38.
NO Producción Científica
DS UVaDOC
RD 24-nov-2024