THE INTERSTATE RIVER COMPACT - INCENTIVES FOR NONCOMPLIANCE

Twenty-one western United States rivers are governed by interstate com pacts. This gaper examines the issue of compliance with interstate riv er compacts in the western United States and some of the factors influ encing compact compliance. Theoretical arguments and empirical evidenc e presented in this paper suggest that upper basin states governed by interstate compacts with percentage delivery rules are more likely to comply with compact requirements than states whose rivers are governed by fixed delivery rules. Evidence indicates that both the frequency a nd level of noncompliance tend to be larger under a fixed allocation r ule. Under such a rule the upper basin state bears a greater share of a shortage and experiences greater variability so it would have a grea ter incentive to cheat. A comparative study of the South Platte and La Plata Rivers is consistent with this hypothesis. Given the large dema nds imposed on many western United States rivers, our analysis suggest s that compliance analysis is likely to be an important component of i nterstate negotiations and that administration of interstate compacts will become increasingly important.