Game theory based models to analyze water conflicts in the Middle Route of the South-to-North Water Transfer Project in China.

This study applied game theory based models to analyze and solve water conflicts concerning water allocation and nitrogen reduction in the Middle Route of the South-to-North Water Transfer Project in China. The game simulation comprised two levels, including one main game with five players and four sub-games with each containing three sub-players. We used statistical and econometric regression methods to formulate payoff functions of the players, economic valuation methods (EVMs) to transform non-monetary value into economic one, cost-benefit Analysis (CBA) to compare the game outcomes, and scenario analysis to investigate the future uncertainties. The validity of game simulation was evaluated by comparing predictions with observations. The main results proved that cooperation would make the players collectively better off, though some player would face losses. However, players were not willing to cooperate, which would result in a prisoners' dilemma. Scenarios simulation results displayed that players in water scare area could not solve its severe water deficit problem without cooperation with other players even under an optimistic scenario, while the uncertainty of cooperation would come from the main polluters. The results suggest a need to design a mechanism to reduce the risk of losses of those players by a side payment, which provides them with economic incentives to cooperate. Copyright (c) 2010 Elsevier Ltd. All rights reserved.