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Water Costs Allocation in Complex Systems Using a Cooperative Game Theory Approach

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  • Giovanni Sechi
  • Riccardo Zucca
  • Paola Zuddas

Abstract

The management of complex water resource systems that address water service recovery costs and consider adequate contributions and priorities require methods that integrate technical, economic, environmental, social and legal aspects into a comprehensive framework. In Europe, the Water Framework Directive (WFD) 2000/60/EC recommends that the pricing politics in a river basin take into account the cost recovery and the economic sustainability of the water use. However, the current cost allocation methods do not consider the user’s willingness to pay and often do not permit a total cost recovery. Thus, a new approach is required that includes these requirements when defining water rates. This article presents a methodology to allocate water service costs in a water resource system among different users that attempts to fulfil the WFD requirements. The methodology is based on Cooperative Game Theory (CGT) techniques and on the definition of the related characteristic function using a mathematical optimisation approach. The CGT provides the instruments that are necessary to analyse situations that require a cost-sharing rule. The CGT approach can define efficient and fair solutions that provide the appropriate incentives among the parties involved. Therefore, the water system cost allocation has been valued as a game in which it is necessary to determine the right payoff for each player that is, in this case, a water user. To apply the CGT principles in a water resources system, the characteristic function needs to be defined and evaluated using an adequate modelling approach; in this study, it is evaluated using the optimisation model WARGI. (Sechi and Zuddas 2000 ). The so-called “core” represents the game-solution set. It represents the area of the admissible cost allocation values from which the boundaries on the cost values for each player can be supplied. Within the core lie all of the allocations that satisfy the principles of equity, fairness, justice, efficiency and that guarantee cost recovery. The core of a cooperative game can represent a useful instrument to define the water cost rates. Furthermore, it can be used as a valid support in water resource management to achieve the economic analysis required by the WFD. The methodology was applied to a multi-reservoir and multi-demand water system in Sardinia, Italy. Copyright Springer Science+Business Media Dordrecht 2013

Suggested Citation

  • Giovanni Sechi & Riccardo Zucca & Paola Zuddas, 2013. "Water Costs Allocation in Complex Systems Using a Cooperative Game Theory Approach," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(6), pages 1781-1796, April.
  • Handle: RePEc:spr:waterr:v:27:y:2013:i:6:p:1781-1796
    DOI: 10.1007/s11269-012-0171-5
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    References listed on IDEAS

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    1. Ronald C. Griffin, 2006. "Water Resource Economics: The Analysis of Scarcity, Policies, and Projects," MIT Press Books, The MIT Press, edition 1, volume 1, number 026207267x, April.
    2. SCHMEIDLER, David, 1969. "The nucleolus of a characteristic function game," LIDAM Reprints CORE 44, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Lemaire, Jean, 1984. "An Application of Game Theory: Cost Allocation," ASTIN Bulletin, Cambridge University Press, vol. 14(1), pages 61-81, April.
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    2. Seemanta Bhagabati & Akiyuki Kawasaki & Mukand Babel & Peter Rogers & Sarawut Ninsawat, 2014. "A Cooperative Game Analysis of Transboundary Hydropower Development in the Lower Mekong: Case of the 3S Sub-basins," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(11), pages 3417-3437, September.
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    4. Azadeh Ahmadi & Mohammad Amin Zolfagharipoor & Ali Akbar Afzali, 2019. "Stability Analysis of Stakeholders’ Cooperation in Inter-Basin Water Transfer Projects: a Case Study," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 33(1), pages 1-18, January.
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    7. Yi Xiao & Keith W. Hipel & Liping Fang, 2016. "Incorporating Water Demand Management into a Cooperative Water Allocation Framework," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 30(9), pages 2997-3012, July.
    8. Ben Li & Guangming Tan & Gang Chen, 2016. "Generalized Uncooperative Planar Game Theory Model for Water Distribution in Transboundary Rivers," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 30(1), pages 225-241, January.
    9. Mehdi Zomorodian & Sai Hin Lai & Mehran Homayounfar & Shaliza Ibrahim & Gareth Pender, 2017. "Development and application of coupled system dynamics and game theory: A dynamic water conflict resolution method," PLOS ONE, Public Library of Science, vol. 12(12), pages 1-24, December.
    10. María Borrego-Marín & Carlos Gutiérrez-Martín & Julio Berbel, 2016. "Estimation of Cost Recovery Ratio for Water Services Based on the System of Environmental-Economic Accounting for Water," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 30(2), pages 767-783, January.
    11. Mehran Homayounfar & Sai Lai & Mehdi Zommorodian & Amin Oroji & Arman Ganji & Sara Kaviani, 2015. "Developing a Non-Discrete Dynamic Game Model and Corresponding Monthly Collocation Solution Considering Variability in Reservoir Inflow," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 29(8), pages 2599-2618, June.
    12. Giovanni Sechi & Riccardo Zucca, 2015. "Water Resource Allocation in Critical Scarcity Conditions: A Bankruptcy Game Approach," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 29(2), pages 541-555, January.
    13. Qingsong Wang & Xueliang Yuan & Jian Zuo & Ruimin Mu & Lixin Zhou & Mingxia Sun, 2014. "Dynamics of Sewage Charge Policies, Environmental Protection Industry and Polluting Enterprises—A Case Study in China," Sustainability, MDPI, vol. 6(8), pages 1-19, July.
    14. Yuan Zhi & Paul B. Hamilton & Xiufeng Wang & Zundong Zhang & Longyue Liang, 2018. "Game Theory Analysis of the Virtual Water Strategy," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 32(14), pages 4747-4761, November.
    15. 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.
    16. Javier Alarcón & Alberto Garrido & Luis Juana, 2014. "Managing Irrigation Water Shortage: a Comparison Between Five Allocation Rules Based on Crop Benefit Functions," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(8), pages 2315-2329, June.
    17. Mohammad Ehteram & Samira Ghotbi & Ozgur Kisi & Ahmed EL-Shafie, 2019. "Application of a Coordination Model for a Large Number of Stakeholders with a New Game Theory Model," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 33(15), pages 5207-5230, December.
    18. María M. Borrego-Marín & Carlos Gutiérrez-Martín & Julio Berbel, 2016. "Estimation of Cost Recovery Ratio for Water Services Based on the System of Environmental-Economic Accounting for Water," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 30(2), pages 767-783, January.
    19. Zhuowei Shen & Pan Liu & Bo Ming & Maoyuan Feng & Xiaoqi Zhang & He Li & Aili Xie, 2018. "Deriving Optimal Operating Rules of a Multi-Reservoir System Considering Incremental Multi-Agent Benefit Allocation," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 32(11), pages 3629-3645, September.
    20. Ben Li & Guangming Tan & Gang Chen, 2016. "Generalized Uncooperative Planar Game Theory Model for Water Distribution in Transboundary Rivers," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 30(1), pages 225-241, January.

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