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Sharing a River with Downstream Externalities

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  • Sarina Steinmann und Ralph Winkler

Abstract

We consider the problem of efficient emission abatement in a multi polluter setting, where agents are located along a river in which net emissions accumulate and induce negative externalities to downstream riparians. Assuming a cooperative transferable utility game, we seek welfare distributions that satisfy all agents' participation constraints and, in addition, a fairness constraint implying that no coalition of agents should be better off than it were if all non-members of the coalition would not pollute the river at all. We show that the downstream incremental distribution, as introduced by Ambec and Sprumont (2002), is the only welfare distribution satisfying both constraints. In addition, we show that this result holds true for numerous extensions of our model.

Suggested Citation

  • Sarina Steinmann und Ralph Winkler, 2015. "Sharing a River with Downstream Externalities," Diskussionsschriften dp1508, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp1508
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    References listed on IDEAS

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    1. Parkash Chander & Henry Tulkens, 2006. "The Core of an Economy with Multilateral Environmental Externalities," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 153-175, Springer.
    2. Ambec, Stefan & Sprumont, Yves, 2002. "Sharing a River," Journal of Economic Theory, Elsevier, vol. 107(2), pages 453-462, December.
    3. Erik Ansink & Hans-Peter Weikard, 2012. "Sequential sharing rules for river sharing problems," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 38(2), pages 187-210, February.
    4. Scarf, Herbert E., 1971. "On the existence of a coopertive solution for a general class of N-person games," Journal of Economic Theory, Elsevier, vol. 3(2), pages 169-181, June.
    5. Gabrielle Demange, 2004. "On Group Stability in Hierarchies and Networks," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 754-778, August.
    6. van den Brink, René & van der Laan, Gerard & Moes, Nigel, 2012. "Fair agreements for sharing international rivers with multiple springs and externalities," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 388-403.
    7. Herings, P. Jean Jacques & van der Laan, Gerard & Talman, Dolf, 2008. "The average tree solution for cycle-free graph games," Games and Economic Behavior, Elsevier, vol. 62(1), pages 77-92, January.
    8. René Brink & Gerard Laan & Valeri Vasil’ev, 2007. "Component efficient solutions in line-graph games with applications," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(2), pages 349-364, November.
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    More about this item

    Keywords

    Downstream externalities; downstream incremental distribution; optimal emission abatement; river pollution;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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