Peaceful Agreements to Share a River
Tinbergen Institute Discussion Paper 2020-016/II
24 Pages Posted: 29 Apr 2020
Date Written: March 31, 2020
This paper develops a model of conflict resolution over scarce water in a trans-boundary river. In our model, we consider countries that are located along a river and made a military investment. Given these investments and their location along the river, they sequentially bargain over the surplus of water, or decide to engage in a military conflict with their upstream neighbour. The probability of winning a military conflict is determined by a contest success function which depends on the military investments made before. We speak about a peaceful agreement if the countries rationally decide to bargain over the water instead of engaging into a military conflict. We show that, if all benefit functions are nonnegative, increasing and concave, then for every level of military investment, there always exists a peaceful agreement where every country prefers to bargain peacefully for the water. We provide a scenario that yields one such a peaceful agreement.
Keywords: River sharing, peaceful agreement, contest success function, subgame perfect equilibrium
JEL Classification: C78, D62, D74, Q25
Suggested Citation: Suggested Citation