This chapter deals with inter-basin water covenants guided by arbitration, which are feasible when the principle of interregional solidarity is politically accepted and implemented through public agencies sharing policies of common welfare and interregional efficiency. As a main objective, the stochastic arbitration model herein helps the agencies make joint decisions on quantity and price, namely, the commercial side of the agreement. The model is built by simulating a water demand and supply setting from information on random surplus in the donor basin and random deficit in the recipient, the required geographical/economic information being available in technical and statistical studies. Although environmental needs should be considered to estimate surplus in the donor basin, an efficient use of water in the recipient basin should be assured to estimate deficit in this area. Besides irrigation, the model is also applicable to urban supply projects. A numerical example highlights its easy application through tables.
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Ballestero, E. (2007). Water Public Agencies Agreeing to A Covenant for Water Transfers: How to Arbitrate Price–Quantity Clauses. In: Weintraub, A., Romero, C., Bjørndal, T., Epstein, R., Miranda, J. (eds) Handbook Of Operations Research In Natural Resources. International Series In Operations Research amp; Mana, vol 99. Springer, Boston, MA. https://doi.org/10.1007/978-0-387-71815-6_7
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