A Stochastic Multiple Players Multi-Issues Bargaining Model for the Piave River Basin^*

This paper investigates the usefulness of non-cooperative bargaining theory for the analysis of negotiations on water allocation and management. It explores the impacts of different economic incentives, of a stochastic environment and of varying individual preferences on players' strategies and equilibrium outcomes. The analysis is based on numerical simulations of a multilateral, multiple issues, non-cooperative bargaining model of water allocation in the Piave River Basin, located in the North East of Italy. Players negotiate in an alternating offer manner over the sharing of water resources. Exogenous uncertainty over the size of the negotiated amount of water is introduced to capture the fact that water availability is not known with certainty to negotiating players. We construct the players' objective function with their direct input. The applicability of our multiple players, multi-issues, stochastic framework is tested through several comparative statics exercises designed to assess the influence of different sources of bargaining power. Finally, the implications of different attitudes and beliefs over water availability are explored.