Allocation of hydroelectric economic rent using a cooperative game theoretic approach

In this paper the economic rent of a hydroelectric scheme is allocated using a cooperative game theoretic methodology. We assume multiple owners of water rights in a river basin. Furthermore, assume that energy sales benefits, costs and economic rent can be estimated for various coalitions in constructing hydro projects in the basin. With a given construction plan each owner is allocated benefits so that various criteria are fulfilled based on the efficiency of possible coalitions resulting from the subadditive economies of scale and superadditive properties of hydroelectric energy generation expansion. An optimal and feasible allocation is determined using a linear programming model with the appropriate objective function and constraints.