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PDF
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Type:
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Book |
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Author:
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Loehman, Edna T.; Dinar, Ariel |
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Conference:
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Common Property Conference, the Second Biennial Conference of the International Association for the Study of Common Property |
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Location:
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Winnipeg, Manitoba |
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Conf. Date:
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September 26-30 |
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Date:
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1991 |
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URI:
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https://hdl.handle.net/10535/5830
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Sector:
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Water Resource & Irrigation |
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Region:
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North America |
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Subject(s):
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game theory
cooperation
public goods and bads
prisoner's dilemma
cost benefit analysis
water management
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Abstract:
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"Cooperative technology improvements may ameliorate externalities.
However, cooperative solutions may not be achieved without appropriate
institutional mechanisms. Here, design of such an institutional mechanism is proposed based on combining aspects of games proposed for public goods and externality problems. A solution concept, an 'acceptable cooperative solution', is also proposed; such a solution would be accepted because it is unanimously preferred to the status quo and to a noncooperative 'threat point.' The proposed institutional design is based on a repeated Prisoner's Dilemma game. Both noncooperative and cooperative outcomes are defined in terms of political weights on game players. Cost shares in the cooperative
case are used to cover the cost of joint facilities, and Pigouvian taxes are used to give appropriate information signals. Cost shares are equal to political weights to give incentives for correct demand revelation. At the equilibrium of such a game, a set of political weights is produced corresponding to an acceptable cooperative solution. Concepts are applied to an irrigation externality problem in the Central Valley of California to demonstrate existence of an acceptable solution."
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