Self-Induced Coalition Formation between Jurisdictions and Costs Allocation Rules for Development of Infrastructure

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Societal demand for water resources development is changing, and it is becoming necessary to incorporate environmental use of water as the purpose of multi-purpose reservoir development project, together with conventional uses such as flood control, irrigation, or municipal/industrial water. Cost allocation for multi-pupose reservoir development has been examined for practical use. The Results of theoretical research based on game theory has been also accumulated. However, multi-purpose reservoir development involving environmental use has some different characteristics such as(1)participation of users without its own reservoir capacib, (2)externality of coalition, (3)necessity of cost and benefit allocation(net benefit allocation), (4)inefficiency caused by self revelation on users' own benefits, and (5)cost allocation in case plural alternatives exist. These problems were not supposed in the past multi-purpose reservoir development. In this study, cost allocation problem is formulated by using game theory, and the proposal to improve conventional cost allocation method for multi-purpose reservoir development incooporating environmental use. First, characteristics of cost function in reservoir development including users without its own reservoir capacity is shown, and the applicability of conventional cost allccation method is evaluated. Second, cost allocation method is extended to reflect externality of coalition. Third, eiffciency under net benefit allocation mechanism based on self revelation in reservoir renewal is discussed. Finany, coordination mechanism is proposed for the case where the information on users' preferences is incomplete and polarized, and the mechanism is applied to the confict on the renewal of the reservoir for hydropower generation.