Abstract
Agents located from downstream to upstream along an estuary and exposed to a flooding risk have to invest in facilities like a seawall (or dike). As the benefits of that local public good increase along the estuary, upstream agents have to bargain for monetary compensation with the most downstream agent in exchange for more protection effort. The paper analyses different bargaining protocols and determines the conditions under which agents are better off. The results show that upstream agents are involved in a chicken game when they have to bargain with the most downstream agent.
Highlights
Hirshleifer [1] shows with his “Anarchia Island” fable that citizens have successfully agreed to build seawalls to protect themselves from storms threatening to flood the coastline despite the weakest-link structure of that local public good
Hirshleifer [1] shows that cooperation over the building of a seawall can be achieved even if the seawall is known as a weakest-link public good
The seawall example has been revisited in another geographic structure where agents are located from downstream to upstream and have to decide their effort to protect themselves from sea floods
Summary
Hirshleifer [1] shows with his “Anarchia Island” fable that citizens have successfully agreed to build seawalls (or dikes) to protect themselves from storms threatening to flood the coastline despite the weakest-link structure of that local public good. Games 2014, 5 land, a network of small rivers to control the flood or a second seawall This estuarine geography feature implies that when the sea enters, the protection effort implemented by an agent will be a public good for all of the agents who are located upstream from him. To ensure a high level of effort from the most downstream agent, upstream agents have to make monetary transfers To model such negotiations, the most obvious approach is to base the analysis on what is know as bargaining theory with the Rubinstein alternating-offers model. In the literature on international environmental agreements, for instance, results show that for identical agents, only a very small number of players will form a coalition Seminal papers using this approach are Carraro and Siniscalco [3] and Barrett [4], and a survey can be found in Finus [5].
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