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A bargaining model for sharing water in a river with negative externality

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Abstract

This article is focused on the problem of river sharing in the presence of pollution as a negative externality between two riparian states (agents). In this paper, a market-based contract mechanism is presented; it can address the issue of negative externality imposed by an upstream agent on the downstream agents while sharing a river. The proposed mechanism incorporates a penalty for pollution and also incentives for trading water between upstream and downstream agent. The mechanism introduces a new concept of negative water as penalty against pollution for an upstream agent in a contract for water sharing. The contract is analyzed by a market-based bargaining model to determine a negotiated treaty between the upstream agent and the downstream agent. The results show the characterization of agents with regard to agreement points for negotiated treaty. Also, it shows that an equilibrium exists for a unique solution that makes both the agents better off. The model discussed in this paper can be easily applied to any transboundary river conflict where pollution plays an important role.

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Notes

  1. Absolute Territorial Sovereignty (ATS) or The Harmon Doctrine: It suggests a riparian state has full control over the over the water yields within her territory, and can utilize those waters without considering dependent livelihood or claims of the other co-riparian agents.

  2. Absolute Territorial Integrity (ATI): This principle considers downstream riparian states to demand the the flow of the river from an upper riparian state without compromising the quantity or quality.

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Acknowledgements

The authors would like to thanks the referees for their comments and suggestions that led the paper into the current form.

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Authors and Affiliations

  1. Indian Institute of Management Visakhapatnam, Andhra Univeristy Campus, Visakhapatnam, 530003, India

    Shivshanker Singh Patel

  2. Indian Institute of Science Bangalore, Bengaluru, 560012, India

    Parthasarathy Ramachandran

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  1. Shivshanker Singh Patel
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  2. Parthasarathy Ramachandran
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All authors contributed to the study conception and analysis. The authors have read and approved the final manuscript.

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Correspondence to Shivshanker Singh Patel.

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Patel, S.S., Ramachandran, P. A bargaining model for sharing water in a river with negative externality. OPSEARCH 59, 645–666 (2022). https://doi.org/10.1007/s12597-021-00555-z

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