A cooperative game theory approach to water pricing in a complex water resource system

The interdisciplinary nature of the planning and management of complex water resources systems requires methods that integrate the technical, economic, environmental, social and legal aspects into a comprehensive framework that allows the development of efficient and sustainable water management strategies. This research presents a methodology that allocates costs among water users with a cooperative game theory approach based on a fully integrated river basin model with monthly time steps. The proposed approach starts with the hydrologic and economic characterisation of the system to be modelled. The hydraulic characterisation of the basin includes defining the hydrology with a monthly river-runoff time series, the storage balance in aquifers and reservoirs, and the demand scenario. The economic characterisation of the system is based on the determination of construction costs for new work, the operative, management and replacement (OMR) cost functions definition for hydraulic infrastructures and the shortage penalisation for water use. Decision support systems tools for water resources systems (AquaTool-SIMGES, Andreu et al., 1996; WARGI, Sechi and Zuddas, 2000) are used to simulate the water system in different configurations, to evaluate the performance and to calculate the characteristic function of each user’s coalitions that may be determined in the system. The final cost allocation is calculated using the Shapley Value. The Turia river basin is considered for a case study. The basin is located in the Valencia and Teruel districts (Spain). The allocation costs problem consists of defining a criterion to distribute the existing system infrastructure costs among users, who then benefit from a supply that meets water demands and flood control