Implications of "victim pays" infeasibilities for interconnected games with an illustration for aquifer sharing under unequal access costs

Abstract

This paper considers application of interconnected game theory to modeling of bilateral agreements for sharing common pool resources under conditions of unequal access. Linking negotiations to issues with reciprocal benefits through interconnected game theory has been proposed in other settings to achieve international cooperation because it can avoid outcomes that are politically unacceptable due to the "victim pays" principle. Previous studies have not considered adequately the critical nature of this political infeasibility, if it exists, in determining advantages of interconnection. This paper investigates how game structure and benefits suggested by interconnected game theory are altered when victim pays strategies are removed from the feasibility set. Linking games is shown to have greater advantages than when the structural implications of eliminating victim pays strategies are not considered. Conversely, a class of cases exists where the full cooperation benefits of interconnection are attainable without linking through isolated component games when victim pays outcomes are feasible.