Effect of Pollution on Transboundary River Water Trade

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.