Economic and Political Considerations in Regional Cooperation Models

Abstract

Cooperation among players requires a realization of economic benefits to all players and a meeting of efficiency requirements through economically driven allocations. Cooperation among political (and sometimes hostile) players may not meet these requirements. Political considerations, usually ignored in economic analyses, can hinder or even block possible arrangements. A framework is proposed that includes both economic and political considerations for evaluating transfers or trades of scarce resources. This method quantifies both the economic payoffs using n-person game theory and the political likelihood of any of the coalitions actually forming, using the PRINCE Political Accounting System. The economic-political approach is applied to a case of a potential water transfer in the western Middle East. Results suggest that incorporating political considerations in the analysis stabilizes the regional solution suggested by economic-related allocations.