Why contracts fail: a game theoretic approach to managing urban water

In developing countries, urban water is often provided by public private partnership (PPP). However, PPPs remain highly contentious, with many contracts renegotiated or stalled. Prima facie, this stems from issues in the French model of contract design between two parties – the government and the private operator. Critics point out that in reality, the PPP is a tri-party exchange of promises, services and fees linking the interests of the private operator, the government and the people. We propose a game theoretic analysis comparing a two-party contracting model with a tri-party one, which is tested against a real-world experiment in the water utilities in Manila and Jakarta. Paradoxically, we ?nd that a tri-party contracting model, though analytically more faithful in separating the interest of the government from the consumers’ leads to sub-optimal outcomes. In practical terms, we ?nd that an independent regulator may not generate better outcomes.     

Regional industrial production's spatial distribution and water pollution control: A plant-level aggregation method for the case of a small region in China

With fast economic growth, industrial water pollution has been a serious problem ubiquitously in China. More threatening is that lots of economic developing regions still strategically depend on fast industrialization, neglecting the relationship between production's spatial distribution and regional water environmental carrying capacity. As a small region, Deyang City is the objective case. We propose a plant-level aggregation method to estimate the spatial distribution of industrial water pollution pressure in the future five years. Based on discrete event simulation, newly added industrial projects' sizes and location choices (refer to industrial location theory) are regionally aggregated. COD (Chemical Oxygen Demand) emission into every river reach in the region is calculated respectively. In order to recover the water environmental function, the strategy aims at controlling emission within the carrying capacity of each river reach. And the strategy is assessed on its regional effects and spatial equity, from the perspective of government and industry. The results quantitatively show the diversified uncertain bounds of river reaches' COD adoptions which will aggravate the water pollution. And the pollution control strategy's effect indicates a large different level of spatial equity for industry and government respectively.