The Use of the Sava River as an International Allocation Problem

The use of trans-national common resources like rivers often creates problems between countries, but can also, as some historical examples show, give possibilities for stronger, friendlier political relations. The core of the solution to common resources is precise regulation through trans-national agreements that can be changed only in a Paretian manner. After a short presentation of examples of such agreements, the process of decision-making implemented in the 2004 Sava Framework Agreement will be analysed using economic theory, especially the Coase theorem and simple bargaining theory. Property rights in this agreement seem to be weak, as well as some regulations of the decision process itself. This weakness can be cured by installing a supra-national authority to supervise the decision-making process. In this case, the authority would be the European Union, as all the countries involved are trying to harmonise with the EU.