Abstract
Transboundary rivers are often polluted by multiple agents located along the river. In this work, we attempt to investigate the impact of pollution on bilateral river water trade. Specifically, we look at how trade quantity and price are affected by pollution damages. The contributions of the work are threefold. First, we propose a stylised two agent model of a polluted which describes allocation decisions. Next, we characterise the non-cooperative behaviour of this system of two agents. As the final result of this article we derive the participation condition for bilateral trade and an expression for the extent of trade which can thus happen.
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Notes
- 1.
In order to focus our attention completely on pollution externality and its consequences on allocation, we restrict our study to two agents and do not consider complex river geographies. This approach simplifies our analysis and allows us to avoid excessive notation.
- 2.
The allocations \(x_{i}\) and \(x_{k}\) may be thought of as the net consumptions obtained after accounting for the return flows.
- 3.
The assumption of linearity is taken for mathematical convenience as it allows for an easier understanding of the dynamics of the strategic situation.
- 4.
Had \(q_{0}-\kappa (\,s_{i}+s_{k}-2x'_{i})\,<0\), then the inequality would be \(d_{p}\ge \frac{b'_{k}(\,s_{k}+s_{i}-x'_{i})\,}{q_{0}-\kappa (\,s_{i}+s_{k}-2x'_{i})\,}\).
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Abraham, A., Ramachandran, P. (2019). Effect of Pollution on Transboundary River Water Trade. In: Morais, D., Carreras, A., de Almeida, A., Vetschera, R. (eds) Group Decision and Negotiation: Behavior, Models, and Support. GDN 2019. Lecture Notes in Business Information Processing, vol 351. Springer, Cham. https://doi.org/10.1007/978-3-030-21711-2_12
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