|Hydropolitics along the Jordan River. Scarce Water and Its Impact on the Arab-Israeli Conflict (UNU, 1995, 272 pages)|
|3. Towards an interdisciplinary approach to water basin analysis and the resolution of international water disputes|
|3.3. Paradigms for analysis of international water conflicts|
Game theory, like economics, assumes enlightened self-interest and "rational behaviour." A quantitative analysis can be performed to show how n number of players should react to a competitive setting in order to "win." A rational outcome is defined by an equilibrium point ("pareto-optimality" to economists), where no player can gain by unilaterally moving away from that point.
Game theory has been applied to a variety of issues as diverse as national security, social justice, and the existence of superior beings, but it has been applied to international water conflicts only sporadically. Rogers (1969) analyses conflicting interests along the Lower Ganges and suggests strategies for cooperation between India and Pakistan. Dufournaud (1982) applies game theory to both the Columbia and the Lower Mekong to show that "mutual benefit" is not always the most efficient criterion to measure cooperative river basins. Dinar and Wolf (1992) use cooperative game theory to explore the economic pay-offs that might be generated in a technology-for-water exchange between Israel and Egypt, and how those payoffs might be distributed to induce cooperation.
As political science asks, "Does cooperation beget cooperation?," game theory poses, somewhat less didactically, the question "What is the correlation between cooperation and efficiency?" In theory, according to R. Axelrod, a player who in an opening move acts generously and on a responding move acts cooperatively, never initiating attack, will outscore any other strategy, given time and averaging. (Cited in Painter 1988)
In practice between competing nations, however, a strong positive relationship exists between tendencies to initiate and to receive international conflict. The correlation between cooperative initiation and receptive tendencies, however, is much weaker. (Platter and Mayer 1989)
Either game theory has not yet developed to the point where it can adequately model complex international decision-making, or the nations surveyed had neither the time nor the faith in time and averaging to pursue "efficiency."
Nevertheless, game theory offers a framework for some level of analysis for water conflict. When the water demand of a population in a water basin begins to approach its supply, for example, the inhabitants have two choices that can be modelled (see Falkenmark [1989a] and LeMarquand  for related work):
These options are equally true for the inhabitants of a single basin that includes two or more political entities. A third option exists, of course, and is practiced most often in arid countries that are less developed or are racked by military strife: they can make no changes in planning or infrastructure and face each cycle of drought with increasing hardship. Since the most reasonable prescriptions in such a case are usually beyond game theory modelling, this case is not considered further.
For the game theorist, this dichotomy between two parties of whether to work unilaterally (defect) or to cooperate is recognizable as a familiar two-player, two-strategy game (Rogers  discusses game theoretical aspects of water resources). The strategies chosen by each player often depend on the geopolitical relationship between them. For two water basins within the same political entity, with clear water rights and a strong government interest, the game may resemble a "stag hunt," where mutual cooperation is the rational strategy.
Between somewhat hostile players, either within a state but more often internationally, the game becomes a "prisoner's dilemma," where, in the absence of strong incentives to cooperate, each player's individual self-interest suggests defection as the rational approach. In cases of high levels of hostility, a game of "chicken" can develop, with each player competing to divert or degrade the greatest amount of water, before the opponent can do the same.
As the amount of water surplus decreases over time, however, the impetus towards conflict or cooperation (pay-offs) might change, depending on such political factors as relative power, level of hostility, legal arrangements, and form and stability of government.