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Contracts versus Trust in Water Allocation:
growing & sharing the pie in Northeast Brazil
Alexander Pfaff ([email protected])
Duke University -- Public Policy, Economics, and Environment
Maria Alejandra Vélez ([email protected])
Universidad de los Andes -- Facultad de Administración
Funded by CRED, Columbia University (NSF-funded DMUU center)
State of Ceará in Northeast (Nordeste)
(popul > 7m)
(rural > 2m)
75% below poverty line
City: Tourism and Industry
These areas are soon to be further connected by a large canal to bring water towards Fortaleza.
Its completion signals the arrival of new allocation decisions for which no decision process or body has been announced.
Rural area: Mainly rice production
 proposers set the agenda by requesting an amount of the resource
 responders accept or reject, the latter giving both a small default payment of R$ 5
 if responders accept, then proposers must decide whether to send back some of their earnings.
For 2:1, the maximum possible total earnings is R$20; for 4:1, it is R$40.
RESULTS – “Message”
1. The ratio of proposers to responders’ earnings.
2. Aiding the lowest earner
3. The frequency of earnings being allocated as if by a 50-50 distribution rule.
- In “Contact” 37% in low productivity and 27% for high productivity .
- In “No Communication” the percentage of accepted observations where earnings were distributed evenly was 26% for low productivity and 13% for high productivity
- In “Message” the percentage of even sharing was 11% for both productivities