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A Fair Contract for Managing Water Scarcity

Amit, RK and Ramachandran, Parthasarathy (2010) A Fair Contract for Managing Water Scarcity. In: Water Resources Management, 24 (6). pp. 1195-1209.

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In public utilities, under supply constraints, fairness considerations lead to a market failure. This paper characterizes a two-period principal-agent contract for demand management, that mitigates this market failure in urban water systems. The contract is designed as an extensive form mechanism using subgame perfect Nash equilibrium (SPNE) as the solution concept. The contract is fair; and is shown to be economically efficient if, in case of deviation by the agent, the gain to the agent and the loss to the principal are small. It is shown that the assumption can be avoided in an infinite horizon contract.

Item Type: Journal Article
Publication: Water Resources Management
Publisher: Springer
Additional Information: Copyright of this article belongs to Springer.
Keywords: Water demand management;Contract theory
Department/Centre: Division of Interdisciplinary Sciences > Management Studies
Date Deposited: 08 Jun 2010 07:01
Last Modified: 19 Sep 2010 05:59
URI: http://eprints.iisc.ac.in/id/eprint/27019

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