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Pricing and Water Resource Allocation Scheme for the South-to-North Water Diversion Project in China

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  • Zhisong Chen
  • Huimin Wang
  • Xiangtong Qi

Abstract

The eastern route of the South-to-North Water Diversion (SNWD-ER) project is a massive-scale interbasin system to transfer water from the Yangtze River to North China. With the infrastructure construction close to completion, the project is now faced with many complicated operations management problem at different levels. The problems are unique in that, on the one hand, the project is expected to be financially self-sustainable by charging water usages, and on the other hand, the water price is regulated for its nature as a social product. One such problem is to achieve a rational water allocation among different users by appropriate pricing schemes. In this paper, we study how to use a two-tier pricing scheme to balance the water allocation by using a Stackelberg game model. From the study, we find that (1) the Stackelberg game always has equilibrium solutions to balance the benefit of every party in the system, which implies that the two-tier pricing scheme can effectively coordinate the water allocation; (2) the two-tier pricing scheme can also result in multiple desirable by-products such as encouraging the implementation of water saving mechanism and giving the local water users certain priority; and (3) the government can adjust the pricing parameters to control and balance the profit of every party. As such we conclude that the two-tier pricing scheme is an effective way that integrates both the government control and market powers to ensure the public interest and the economic benefit, which is suitable for SNWD-ER project. Copyright Springer Science+Business Media Dordrecht 2013

Suggested Citation

  • Zhisong Chen & Huimin Wang & Xiangtong Qi, 2013. "Pricing and Water Resource Allocation Scheme for the South-to-North Water Diversion Project in China," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(5), pages 1457-1472, March.
    • Handle: RePEc:spr:waterr:v:27:y:2013:i:5:p:1457-1472
    DOI: 10.1007/s11269-012-0248-1
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    Cited by:

    1. Zhe Cheng & Yuntong Zhao & Tao Song & Le Cheng & Wenbin Wang, 2023. "White Elephant or Golden Goose? An Assessment of Middle Route of the South-to-North Water Diversion Project from the Perspective of Regional Water Use Efficiency," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 37(2), pages 819-834, January.
    2. Liang Zhang & Sisi Li & Hugo A. Loáiciga & Yanhua Zhuang & Yun Du, 2015. "Opportunities and challenges of interbasin water transfers: a literature review with bibliometric analysis," Scientometrics, Springer;Akadémiai Kiadó, vol. 105(1), pages 279-294, October.
    3. Wolfgang Krinner, 2014. "Financial Analysis of the Spanish Water Sector," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(9), pages 2471-2490, July.
    4. Shawei He & Keith Hipel & D. Kilgour, 2014. "Water Diversion Conflicts in China: A Hierarchical Perspective," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(7), pages 1823-1837, May.
    5. Mengjing Guo & Tiegang Zhang & Jing Li & Zhanbin Li & Guoce Xu & Rui Yang, 2019. "Reducing Nitrogen and Phosphorus Losses from Different Crop Types in the Water Source Area of the Danjiang River, China," IJERPH, MDPI, vol. 16(18), pages 1-17, September.
    6. Wenyi Du & Yubing Fan & Xiaowo Tang, 2016. "Two-part pricing contracts under competition: the South-to-North Water Transfer Project supply chain system in China," International Journal of Water Resources Development, Taylor & Francis Journals, vol. 32(6), pages 895-911, November.
    7. Wenyi Du & Yubing Fan & Lina Yan, 2018. "Pricing Strategies for Competitive Water Supply Chains under Different Power Structures: An Application to the South-to-North Water Diversion Project in China," Sustainability, MDPI, vol. 10(8), pages 1-13, August.
    8. Zhisong Chen & Shong-Iee Ivan Su & Huimin Wang, 2019. "Inter-Basin Water Transfer Supply Chain Equilibrium and Coordination: A Social Welfare Maximization Perspective," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 33(7), pages 2577-2598, May.
    9. Olga A. CHERNOVA, 2018. "Information Risks in Water Resources Management of a Region," Upravlenets, Ural State University of Economics, vol. 9(5), pages 40-47, October.
    10. Sheng, Jichuan & Webber, Michael, 2017. "Incentive-compatible payments for watershed services along the Eastern Route of China’s South-North Water Transfer Project," Ecosystem Services, Elsevier, vol. 25(C), pages 213-226.
    11. Zhisong Chen & Lingling Pei, 2018. "Inter-Basin Water Transfer Green Supply Chain Equilibrium and Coordination under Social Welfare Maximization," Sustainability, MDPI, vol. 10(4), pages 1-28, April.
    12. Giri R. Kattel & Wenxiu Shang & Zhongjing Wang & John Langford, 2019. "China’s South-to-North Water Diversion Project Empowers Sustainable Water Resources System in the North," Sustainability, MDPI, vol. 11(13), pages 1-12, July.
    13. repec:aly:journl:202216 is not listed on IDEAS
    14. Kaiyong Wang & Pengyan Zhang & Bo Pang, 2018. "Process and Mechanism of Agricultural Irrigation Benefit Allocation Coefficient Based on Emergy Analysis—A Case Study of Henan, China," Sustainability, MDPI, vol. 10(12), pages 1-15, November.
    15. Zhao, Siwei & Liu, Weidong & Zhu, Mengyuan & Ma, Yanfang & Li, Zongmin, 2021. "A priority-based multi-objective framework for water resources diversion and allocation in the middle route of the South-to-North Water Diversion Project," Socio-Economic Planning Sciences, Elsevier, vol. 78(C).
    16. Mengdi Li & Yaoping Cui & Yaochen Qin & Zhifang Shi & Nan Li & Xiaoyan Liu & Yadi Run & Oliva Gabriel Chubwa, 2021. "Estimating the Impact of Ecological Migrants on the South-to-North Water Diversion in China," IJERPH, MDPI, vol. 18(23), pages 1-16, November.
    17. Zhen Zhou & Meijia Zhang & Xiaohui Yu & Xijun He & Kang Wang & Quan Shao & Jie Wang & Hongxia Sun, 2019. "PM 2.5 Cooperative Control with Fuzzy Cost and Fuzzy Coalitions," IJERPH, MDPI, vol. 16(7), pages 1-14, April.
    18. Zhisong Chen & Keith C.K. Cheung & Manyi Tan, 2019. "Inter-Basin Water Transfer Supply Chain Coordination with Ramsey Pricing," IJERPH, MDPI, vol. 16(19), pages 1-22, September.
    19. Meng Liu & Wenwen Ding & Yali Lu, 2022. "Collaborative Management of a Sustainable Supply Chain in a Water Diversion Project," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 36(8), pages 2665-2683, June.

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