Developing a Decision Support Model to Assess the Value of Cooperation Benefits Under Climate Change

Abstract Climate change exacerbates the imbalance between water demand and supply in the Colorado River basin, shared by seven US states and Mexico. As water availability decreases, current allocation rules need reconsideration since they promote inefficient water use. This chapter develops a decision support model to examine the value of cooperation in achieving efficient water use in the basin. The chapter models water uses for urban centers and irrigation districts under two different climate change scenarios. The analysis assesses the value of cooperation through water trade between sectors (agricultural and urban) and states. The Shapley value, the Nash-Harsanyi solution, and the nucleolus provide insights into the efficient share of benefits allocation under cooperative arrangements. Several stability indexes are calculated to compare the stability of the basin’s coalitional arrangements. The results highlight the relative contribution of sectors and regions to agreed water and benefits allocations. The value of cooperation increases with the severity of climate change. Cooperation enhances benefits for each state, especially for Nevada, California, Wyoming, and Utah.