Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/244335 
Year of Publication: 
2021
Series/Report no.: 
IFRO Working Paper No. 2021/07
Version Description: 
October 29, 2021
Publisher: 
University of Copenhagen, Department of Food and Resource Economics (IFRO), Copenhagen
Abstract: 
In river systems, costly upstream pollution abatement creates downstream welfare gains. Absent adequate agreement on how to share the gains, upstream regions lack incentives to reduce pollution levels. We develop a model that makes explicit the impact of water quality on production benefits and suggest a solution for sharing the gains of optimal pollution abatement, namely the Shapley value of an underlying convex cooperative game. We provide a decentralized implementation through a smart contract to automate negotiations. It ensures a socially optimal agreement supported by fair compensations to regions that turn to cleaner production from those that pollute.
Subjects: 
River pollution
Decentralized mechanism
Shapley value
water quality
smart contracts
JEL: 
C7
D47
D62
Q52
Q25
Document Type: 
Working Paper

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