Does Information Asymmetry Impact Sub-Regions’ Cooperation of Regional Water Resource Allocation?

Abstract

Water resources allocation is an urgent problem for basin authorities. In order to obtain greater economic benefits from limited water supplies, sub-regions must cooperate with each other. To study the influence of cooperation among sub-regions and the symmetry of cooperation information on the interests of the basin authority and each sub-region, this study proposes a regional water allocation model in three different situations: (1) non-cooperation; (2) cooperation and information symmetry; (3) cooperation and information asymmetry. The proposed model clearly reflects the Stackelberg game relationship between the basin authority and sub-regions. Finally, the model is applied to the Qujiang River Basin in China, and the decisions of the basin authority and sub-regional managers of the Qujiang River Basin under three different situations are discussed. The results show that regional cooperation benefits both the cooperative regions and the social welfare value of the entire river basin, when compared with non-cooperation.