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Cooperative game theory provides an appropriate framework to assess the likelihood of conflict resolution, encourage cooperation among parties, and determine each party's share in resource sharing conflicts. In calculating the fair and efficient allocation of the incremental benefits of cooperation, cooperative game theory methods often do not consider the exogenous bargaining powers of the players based on factors, that are external to the game, such as their political, economic, and military powers. This study reformulates three well-known cooperative game theory methods, namely, Nash-Harsanyi, Shapley, and Nucleolus, to account for the exogenous bargaining powers of the players in cooperative games. Using the Caspian Sea international conflict as an example, this paper shows how the negotiators' exogenous bargaining power can change the outcome of resource sharing games. The proposed weighted cooperative game theory approach can help determine practical resolutions for real-world conflicts in which the exogenous powers of players can have a significant influence on the outcome of negotiations. [ABSTRACT FROM AUTHOR]

We develop a game theoretic model of the role of foresight in games involving users interacting over a public good. Previous research in this area has applied game theory to understand social dilemmas and inform policy initiatives. However, considerations of the "evolving structure" of natural resource games over time and agents' planning horizon raises the complexity of game analysis substantially and has often been overlooked. We analyze a simple model of an irrigation system shared by two users and consider how players will act under different levels of foresight. Without foresight into game changes over time, players are blind to the fact that they are in a game of chicken. We model agents with foresight by interconnecting games across time and show how this creates opportunities for "strategic loss" early on, allowing players with foresight to reduce total costs. High future costs can thus be avoided with foresight if the rising costs of inaction are made apparent. We consider the effect of discounting and differences between players to provide policy recommendations regarding incentives for foresight. Key Points: Myopic stakeholders allow public goods to deteriorate not realizing they are in a long‐term game of chickenForesight allows them to resolve conflicts earlier and cheaper through strategic lossThe incentive for foresight is ambiguous, depending on differentiation between players [ABSTRACT FROM AUTHOR]

Optimal risk-based levee designs are usually developed for economic efficiency. However, in river systems with multiple levees, the planning and maintenance of different levees are controlled by different agencies or groups. For example, along many rivers, levees on opposite riverbanks constitute a simple leveed river system with each levee designed and controlled separately. Collaborative planning of the two levees can be economically optimal for the whole system. Independent and self-interested landholders on opposite riversides often are willing to separately determine their individual optimal levee plans, resulting in a less efficient leveed river system from an overall society-wide perspective (the tragedy of commons). We apply game theory to simple leveed river system planning where landholders on each riverside independently determine their optimal risk-based levee plans. Outcomes from noncooperative games are analyzed and compared with the overall economically optimal outcome, which minimizes net flood cost system-wide. The system-wide economically optimal solution generally transfers residual flood risk to the lower-valued side of the river, but is often impractical without compensating for flood risk transfer to improve outcomes for all individuals involved. Such compensation can be determined and implemented with landholders' agreements on collaboration to develop an economically optimal plan. By examining iterative multiple-shot noncooperative games with reversible and irreversible decisions, the costs of myopia for the future in making levee planning decisions show the significance of considering the externalities and evolution path of dynamic water resource problems to improve decision-making. [ABSTRACT FROM AUTHOR]

Summary Reservoir systems with multiple operators can benefit from coordination of operation policies. To maximize the total benefit of these systems the literature has normally used the social planner’s approach. Based on this approach operation decisions are optimized using a multi-objective optimization model with a compound system’s objective. While the utility of the system can be increased this way, fair allocation of benefits among the operators remains challenging for the social planner who has to assign controversial weights to the system’s beneficiaries and their objectives. Cooperative game theory provides an alternative framework for fair and efficient allocation of the incremental benefits of cooperation. To determine the fair and efficient utility shares of the beneficiaries, cooperative game theory solution methods consider the gains of each party in the status quo (non-cooperation) as well as what can be gained through the grand coalition (social planner’s solution or full cooperation) and partial coalitions. Nevertheless, estimation of the benefits of different coalitions can be challenging in complex multi-beneficiary systems. Reinforcement learning can be used to address this challenge and determine the gains of the beneficiaries for different levels of cooperation, i.e., non-cooperation, partial cooperation, and full cooperation, providing the essential input for allocation based on cooperative game theory. This paper develops a game theory–reinforcement learning (GT–RL) method for determining the optimal operation policies in multi-operator multi-reservoir systems with respect to fairness and efficiency criteria. As the first step to underline the utility of the GT–RL method in solving complex multi-agent multi-reservoir problems without a need for developing compound objectives and weight assignment, the proposed method is applied to a hypothetical three-agent three-reservoir system. [ABSTRACT FROM AUTHOR]

Abstract: In a recent article in this journal entitled “Game Theory and Climate Diplomacy”, DeCanio and Fremstad (2013) provide an interesting treatment of a range of simple game theoretic characterizations of international climate negotiations. The authors use the Nash and Maxi-min stability definitions to analyze 25 two-by-two ordinal games, which they recognize as “possible game-theoretic characterizations of climate negotiations between two players (e.g., Great Powers or coalitions of states)”. The authors' main conclusion that the Prisoner's Dilemma might not be the best description of climate negotiations game is consistent with the findings of others who have studied two-by-two conflicts over natural commons (Bardhan, 1993; Madani, 2010; Sandler, 1992; Taylor, 1987). Nevertheless, given the importance of the climate change issue, as well as the potential effects of our actions on the state of the environment and the well-being of future generations, I would like to address some gaps in their analysis, which result in it having limited usefulness for policy purposes. Of course, all models are simplified representations of reality, full of limitations. “Essentially, all models are wrong, but some are useful” (Box and Draper, 1987). So, “the practical question is how wrong do they have to be to not be useful” (Box and Draper, 1987). Models' limitations need to be carefully considered when interpreting them or applying their results to policy but some models are too simple to provide useful policy advice. [Copyright &y& Elsevier]

Beneficiaries of common pool resources (CPRs) may select available noncooperative and regulatory exogenous institutions for managing the resource, as well as cooperative management institutions. All these institutions may increase the long-term gains, prolong the life of the resource, and help to escape the tragedy of the commons trap. Cooperative game theory approaches can serve as the backbone of cooperative CPR management institutions. This paper formulates and applies several commonly used cooperative game theoretic solution concepts, namely, the core, Nash-Harsanyi, Shapley, and nucleolus. Through a numerical groundwater example, we show how CPR users can share the gains obtained from cooperation in a fair and efficient manner based on these cooperative solution concepts (management institutions). Although, based on their fairness rationales, various cooperative management institutions may suggest different allocations that are potentially acceptable to the users, these allocation solutions may not be stable as some users may find them unfair. This paper discusses how different methods, such as application of the plurality rule and power index, stability index, and propensity to disrupt concepts, can help identify the most stable and likely solutions for enforcing cooperation among the CPR beneficiaries. Furthermore, how the noncooperative managerial characteristics of the CPR users can affect the stability and acceptability of the different cooperative CPR management institutions is discussed, providing valuable policy insights for cooperative CPR management at community levels. [ABSTRACT FROM AUTHOR]

California's Sacramento-San Joaquin Delta is the major hub of California's water supply system and is central to the ecosystem of many native threatened and endangered species. Conflicts over the Delta have evolved over more than a century. This paper traces changes in this conflict in game-theoretic terms, with its implications for the region's physical and ecological decline and governance. The Delta is not a zero-sum problem and win-win resolutions may exist if stakeholders cooperate. Game theory provides some insights on the potential for win-win solutions. The Delta problem has had a Prisoner's Dilemma structure, in which stakeholder self-interest makes cooperation unlikely within a reasonable time frame. However, the core of the Delta conflict is changing as the unsustainable future becomes more widely understood. Today's Delta problem has characteristics of a Chicken game, where cooperation is in everyone's interest, but it is unlikely because parties deviating from the status quo are likely to bear more of the costs of a long-term solution. The State of California may become the victim (or chicken) of the Delta game, bearing the greatest costs, if it continues to rely on leaving parties to develop voluntary cooperative solutions without a sufficient mechanism for enforcing cooperation. [ABSTRACT FROM AUTHOR]

Abstract: Game theory provides a useful framework for studying Multi-Criteria Decision Making problems. This paper suggests modeling Multi-Criteria Decision Making problems as strategic games and solving them using non-cooperative game theory concepts. The suggested method can be used to prescribe non-dominated solutions and also can be used as a method to predict the outcome of a decision making problem. Non-cooperative stability definitions for solving the games allow consideration of non-cooperative behaviors, often neglected by other methods which assume perfect cooperation among decision makers. To deal with the uncertainty in input variables a Monte-Carlo Game Theory (MCGT) approach is suggested which maps the stochastic problem into many deterministic strategic games. The games are solved using non-cooperative stability definitions and the results include possible effects of uncertainty in input variables on outcomes. The method can handle multi-criteria multi-decision-maker problems with uncertainty. The suggested method does not require criteria weighting, developing a compound decision objective, and accurate quantitative (cardinal) information as it simplifies the decision analysis by solving problems based on qualitative (ordinal) information, reducing the computational burden substantially. The MCGT method is applied to analyze California’s Sacramento-San Joaquin Delta problem. The suggested method provides insights, identifies non-dominated alternatives, and predicts likely decision outcomes. [Copyright &y& Elsevier]

Abstract: Cooperative game theory solutions can provide useful insights into how parties may use water and environmental resources and share any benefits of cooperation. Here, a method based on Nash and Nash–Harsanyi bargaining solutions is developed to explore the Federal Energy Regulatory Commission (FERC) relicensing process, in which owners of non-federal hydropower projects in the United States have to negotiate their allowable operations, with other interest groups (mainly environmental). Linkage of games to expand the feasible solution range and the “strategic loss” concept are discussed and a FERC relicensing bargaining model is developed for studying the bargaining stage (third stage) of the relicensing process. Based on the suggested solution method, how the lack of incentive for cooperation results in long delay in FERC relicensing in practice is explained. Further, potential effects of climate change on the FERC relicensing are presented and how climate change may provide an incentive for cooperation among the parties to hasten the relicensing is discussed. An “adaptive FERC license” framework is proposed, based on cooperative game theory, to improve the performance and adaptability of the system to future changes with no cost to the FERC, in face of uncertainty about future hydrological and ecological conditions. [ABSTRACT FROM AUTHOR]

Summary: Managing water resources systems usually involves conflicts. Behaviors of stakeholders, who might be willing to contribute to improvements and reach a win–win situation, sometimes result in worse conditions for all parties. Game theory can identify and interpret the behaviors of parties to water resource problems and describe how interactions of different parties who give priority to their own objectives, rather than system’s objective, result in a system’s evolution. Outcomes predicted by game theory often differ from results suggested by optimization methods which assume all parties are willing to act towards the best system-wide outcome. This study reviews applicability of game theory to water resources management and conflict resolution through a series of non-cooperative water resource games. The paper illustrates the dynamic structure of water resource problems and the importance of considering the game’s evolution path while studying such problems. [Copyright &y& Elsevier]