Flexible water sharing within an international river basin

Increasing scarcity of water resources, and greater variability in availabl e water supply, are causing acute difficulties for allocation agreements am ong users of water bodies. One cause of controversy, especially for river w aters, is the inability of most allocation operations to accommodate variat ions in conditions. In this paper we develop a flexible mechanism that prod uces a Pareto-efficient allocation for every possible flow volume in a rive r. Extensions to accommodate other kinds of variation, such as water demand , are feasible. The mechanism is demonstrated using historical water flow d ata for the Ganges, based on stylized water demand relationships for India and Bangladesh. Quantitative comparison between fixed and variable allocati on suggests that variable allocation substantially outperforms fixed alloca tion, improving regional welfare by at least ten percent.