Cooperative water management and ecosystem protection under scarcity and drought in arid and semiarid regions

• A cooperative game theory framework is developed to analyze water management policies.
• Stakeholders' cooperation reduces drought damage costs.
• Inclusion of strategic behavior of stakeholders affects policy outcomes.
• Ecosystem protection requires cooperation and policy intervention.

Climate change impacts and the growing concern on environmental water demand are further increasing competition for scarce water resources in many arid and semiarid regions worldwide. Under these circumstances, new water allocation mechanisms based on the involvement of stakeholders are needed, for an efficient and fair allocation of water and income among users. This paper develops a cooperative game theory framework in order to analyze water management policies that could address scarcity and drought in a typical arid and semiarid basin in Southeastern Spain. The results provide clear evidence that achieving cooperation reduces drought damage costs. However, cooperation may have to be regulated by public agencies, such as a basin authority, when scarcity is very high, in order to protect ecosystems and maintain economic benefits. The cooperative game theory solutions and stability indexes examined in this paper demonstrate the importance of incorporating the strategic behavior of water stakeholders in the design of acceptable and stable basin-wide drought mitigation policies.