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The Rhine River and the Tragedy of the Commons : A Transaction Costs Approach to International River Cooperation

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The Rhine River is an international river which is shared by nine riparian countries. In retrospect, the River has often experienced the tragedy of the commons as a result of incompleteness and uncertainty of property rights over the Rhine: the inefficiency of the Rhine transportation, fishery and resource exhaustion, extreme pollution, etc. An efficient or cooperative outcome, Coasian bargaining predicts, is not achievable since each state does not care about the entire Rhine but its own interests. To address such problems, the Rhine riparian states have managed to agree on many international treaties and conventions: Salmon treaty, ICPR, the Chloride and Chemical Conventions, and Rhine Action Programme. They have developed various forms of institutions or regimes. In particular, it is argued that the institutional choice is endogenized and each choice of institutions is primarily explained by two key parameters: transaction costs involving dispute resolutions and opportunity costs resulting from non-cooperative use of the Rhine.

Abstract

The Rhine River is an international river which is shared by nine riparian countries. In retrospect, the River has often experienced the tragedy of the commons as a result of incompleteness and uncertainty of property rights over the Rhine: the inefficiency of the Rhine transportation, fishery and resource exhaustion, extreme pollution, etc. An efficient or cooperative outcome, Coasian bargaining predicts, is not achievable since each state does not care about the entire Rhine but its own interests. To address such problems, the Rhine riparian states have managed to agree on many international treaties and conventions: Salmon treaty, ICPR, the Chloride and Chemical Conventions, and Rhine Action Programme. They have developed various forms of institutions or regimes. In particular, it is argued that the institutional choice is endogenized and each choice of institutions is primarily explained by two key parameters: transaction costs involving dispute resolutions and opportunity costs resulting from non-cooperative use of the Rhine.

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