Implications of “victim pays” infeasibilities for interconnected games with an illustration for aquifer sharing under unequal access costs

Abstract

This paper considers application of interconnected game theory to modeling of bilateral agreements for sharing common pool resources under conditions of unequal access. Linking negotiations to issues with reciprocal benefits through interconnected game theory has been proposed in other settings to achieve international cooperation because it can avoid outcomes that are politically unacceptable due to the “victim pays” principle. Previous studies have not considered adequately the critical nature of this political infeasibility, if it exists, in determining advantages of interconnection. This paper investigates how game structure and benefits suggested by interconnected game theory are altered when victim pays strategies are removed from the feasibility set. Linking games is shown to have greater advantages than when the structural implications of eliminating victim pays strategies are not considered. Conversely, a class of cases exists where the full cooperation benefits of interconnection are attainable without linking through isolated component games when victim pays outcomes are feasible.

Dividing the waters: An empirical analysis of interstate compact allocation of transboundary rivers

“…Other studies emphasize the potential for water markets to play a useful role in resolving international water disputes [e.g., Dinar and Wolf, 1994;Easter et al, 1999;Perry et al, 1997;World Water Commission, 2000;Fisher and Huber-Lee, 2005]. Finally, a few theoretical studies address general allocation issues from a game theoretic perspective [e.g., Rogers, 1997;Ambec and Sprumont, 2002;Just and Netanyahu, 2004;Carraro et al, 2005;Wu and Whittington, 2006;Eleftheriadou and Mylopoulos, 2008]. Dinar et al [2007] develop an integrated approach to the study of conflict over transboundary international water resources, applying theory from international relations, economics, and international law, as well as the quantitative tools of river basin modeling and game theory.…”

Management of Transboundary Water Resources under Scarcity

“…Another application of the interconnected game concept can be found in Just and Netanyahu (2004) where they consider modeling bilateral agreements for sharing common pool resources (such as groundwater aquifer) under conditions of unequal access. Their work shows how game structure and benefits suggested by interconnected games are modified when the victim pays strategies are removed from the feasibility set.…”

Exploring Transboundary Water Conflict and Cooperation

“…[5] Just and Netanyahu [2004] develop a conceptual game-theoretic framework, which helps explore potential bilateral agreements on sharing common pool resources under conditions of unequal access. The framework combines the ''linking'' with the ''victim pays'' principles and has been suggested in the past for situations where linking negotiations to other issues with reciprocal benefits may achieve international cooperation since it can avoid outcomes that are politically unacceptable due to the victim pays principle.…”