Game Theory and Water Resources Critical Review of its Contributions, Progress and Remaining Challenges

Game Theory (GT), both in its non-cooperative (NCGT) and cooperative (CGT) forms, has been pivotal in its contribution to the analysis of important aspects related to water resources. The 1942 seminal work of Ransmeier on The Tennessee Valley Authority is still considered essential; it continues to inspire many applications related to water allocation decisions. Since Ransmeier, GT models were developed and have been applied to various aspects of water management, such as decisions on cost and benefit allocation in multi-objective multi-use water projects, conflicts and joint management of irrigation projects, management of groundwater aquifers, hydropower facilities, urban water supplies, wastewater treatment plants, and transboundary water disputes.

World water resources face new challenges that suggest a renewed role for GT in water management. Scarcity, growing populations, and massive development have led to increased competition over water resources and subsequent elevated pollution levels. Climate change is expected to unevenly affect the hydrological cycle, leading to increased variability in water supplies across time and space and uncertainty in water allocation decisions. Future investments in water resource projects will be astronomical, needing much more stable rules for cost allocations among participating entities and over time. Levels of water disputes may vary from local to regional, state, and international levels. All of these suggest that while GT models and applications to water resources have advanced over the years, much more is expected.

This monograph will review the main contributions of GT in water resources over the past 70 years. It will compare the set of issues faced by water resources and those which the sector is most likely to face in the coming future. Based on this comparison, a future research agenda and priorities will be proposed. Following the literature's time line with a focus on various methodologies, sectoral applications (such as irrigation, hydropower, environmental water uses, navigation, etc.), and regional issues, we will also identify physical and behavioral features in the water sector that might be conducive to GT (such as scarcity, externality, uncertainty, and competition-conflict) and some features of intervention (such as the important role for policy, regulation, and incentives), which all affect the likelihood of GT solutions in terms of acceptability and stability.