Cleaning a River: An Analysis of Voluntary Joint Action

Abstract

River pollution creates negative externalities to downstream water users. In this paper, we analyze how voluntary joint action of water users can improve pollution abatement when optimal treatment cannot be enforced. We model a transboundary pollution game with a unidirectional pollutant flow. Players are identical except for their location along the river. We find that, surprisingly, the location of coalition members has no impact on coalition stability. Location does, however, affect overall welfare. The more upstream the members of the coalition are, the higher is the overall welfare because the positive externalities of cleaning accrue to a larger number of downstream water users.

Transboundary Externalities and Property Rights: An International River Pollution Model

“…Mäler (1990), Barrett (1994), Fernandez (2002Fernandez ( , 2009) and Dinar (2006) all study two-country river pollution problems. Two theoretical papers that model a multicountry setting are that of Ni and Wang (2007) and Gengenbach, Weikard and Ansink (2010). The model of Gengenbach, Weikard and Ansink (2010) is close to ours in the sense that there is a river with a unidirectional flow of pollution and the agents (countries) along the river are able to choose their own level of pollution abatement (in our model agents choose pollution levels instead of pollution abatement levels).…”

“…Two theoretical papers that model a multicountry setting are that of Ni and Wang (2007) and Gengenbach, Weikard and Ansink (2010). The model of Gengenbach, Weikard and Ansink (2010) is close to ours in the sense that there is a river with a unidirectional flow of pollution and the agents (countries) along the river are able to choose their own level of pollution abatement (in our model agents choose pollution levels instead of pollution abatement levels). Within this model they analyze how voluntary joint action of the agents along the river can increase pollution abatement.…”

“…Within this model they analyze how voluntary joint action of the agents along the river can increase pollution abatement. The main difference between the paper of Gengenbach, Weikard and Ansink (2010) and ours is that their emphasis is on the stability of coalitions of cooperating agents, while we focus on property rights and the distribution of the gain in social welfare that arises when countries along an international river switch from no cooperation on pollution levels to full cooperation. Our model also differs substantially from the river pollution model of Ni and Wang (2007).…”

Sharing the costs of cleaning a river: the Upstream Responsibility rule

“…Other papers such as Gengenbach et al [7] and van der Laan and Moes [16] generalize the aforesaid model by allowing for satiable agents. Wang [19], using a similar model but with a market-based approach, analyzes efficient allocations when trade is restricted to neighboring agents along the river.…”

River Sharing and Water Trade

“…This is also why we are not interested in the core, but rather assess all possible coalition structures for their stability. A second related study is by Gengenbach et al (2010), who assess the formation and stability of coalitions for water pollution abatement along a river.…”