The Problem:

• The use of the water in one country may have an effect on the water users in the other country, these effects are called external effects

• Externality: Effect of A’s economic activity on B’s economic activity that is not reflected by relative prices

• Leading to inefficient resource allocation and potential conflict

(Dombrowsky 2016)

Unidirectional externalities:

(modified after Dombrowsky 2016)

An example for conflicts regarding to transboundary rivers is the Jordan River in the Middle East. To get more informations click below.

• Example Jordan River