A game theory approach to salinization problem of the aral sea basin

Abstract

This paper studies a transboundary economy with two countries located in a lake basin. Each country withdraws water from the lake for irrigation purposes, which in turn causes the lake to desiccate. The receding lake leaves surfaces covered with salt dust, which is transported by wind to the surrounding area, increasing the salinity of the two countries' lands. This paper examines whether a partially cooperative water - allocation scheme, where a central authority chooses the two countries' respective abatement levels (of salt dust) after the countries individually choose per-unit taxes on water withdrawal, induces the countries to withdraw water at the socially efficient level. We find that the partial scheme works, i.e. it induces both countries to optimally choose to withdraw at the socially efficient level. © 2011, ALÖKI Kft., Budapest, Hungary.