Water resource sharing from a microeconomic perspective

This article introduces Capacity Sharing (CS) as an innovative property‐rights structure that encourages efficient use of resources by providing a transparent, probability‐based water sharing system on which sustainable management of international freshwater resources can be based. Derived from micro‐economic theory, CS is the allocation of percentages of the total reservoir space along with inflows and outflows among individual users in accordance with principles of equity and/or efficiency. Employing CS in fresh water management, water users, whether nation states or individual end users, are more likely to be satisfied with their share of available water resources because the sharing arrangement is transparent and provides users with clear probabilities of supply.