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A solution for the flood cost sharing problem

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  • Abraham, Anand
  • Ramachandran, Parthasarathy

Abstract

In this study, we model and study the flood cost sharing problem on a successive transboundary river shared between n-riparian states. We propose a Sequential Upstream Proportional Allocation (SUPA) solution and axiomatically characterise it. We make use of the Extended Producer Responsibility principle to define a characteristic form game which models cooperative behaviour among riparian states. We show that the proposed sharing rule coincides with the Shapley value of this game. The proposed allocation is also a member of the Core of the game.

Suggested Citation

  • Abraham, Anand & Ramachandran, Parthasarathy, 2020. "A solution for the flood cost sharing problem," Economics Letters, Elsevier, vol. 189(C).
    • Handle: RePEc:eee:ecolet:v:189:y:2020:i:c:s0165176520300495
    DOI: 10.1016/j.econlet.2020.109030
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    References listed on IDEAS

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    1. Alcalde-Unzu, Jorge & Gómez-Rúa, María & Molis, Elena, 2015. "Sharing the costs of cleaning a river: the Upstream Responsibility rule," Games and Economic Behavior, Elsevier, vol. 90(C), pages 134-150.
    2. Ambec, Stefan & Ehlers, Lars, 2008. "Sharing a river among satiable agents," Games and Economic Behavior, Elsevier, vol. 64(1), pages 35-50, September.
    3. Ambec, Stefan & Sprumont, Yves, 2002. "Sharing a River," Journal of Economic Theory, Elsevier, vol. 107(2), pages 453-462, December.
    4. Panfei Sun & Dongshuang Hou & Hao Sun, 2019. "Responsibility and sharing the cost of cleaning a polluted river," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 89(1), pages 143-156, February.
    5. María Gómez-Rúa, 2013. "Sharing a polluted river through environmental taxes," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(2), pages 137-153, June.
    6. Baomin Dong & Debing Ni & Yuntong Wang, 2012. "Sharing a Polluted River Network," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 53(3), pages 367-387, November.
    7. Ni, Debing & Wang, Yuntong, 2007. "Sharing a polluted river," Games and Economic Behavior, Elsevier, vol. 60(1), pages 176-186, July.
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    Cited by:

    1. Müller, David & Pisch, Marcus Franz Konrad, 2024. "An improper solution to the flood cost sharing problem," Economics Letters, Elsevier, vol. 238(C).

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    More about this item

    Keywords

    Cost sharing; Transboundary floods; River sharing problem; Shapley value;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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