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Alternative Methods for Cost Allocation in Stochastic Service Systems

Author

Listed:
  • Richard P. McLean

    (Rutgers University)

  • William W. Sharkey

    (Federal Communications Commission,Washington)

Abstract

In this paper we consider the question of allocating costs and setting prices for customers in a variety of queuing systems. We will focus on the problem of setting users fees within an organization for a shared resource, such as a computer center. We argue that both the Aumann-Shapley pricing rule, and a pricing rule based on the Shapley value of a finite game, are appropriate cost allocation methodologies. These approaches allow us to explicitly determine prices for customers in a queuing situation, who differ from one another in terms of their arrival rates, service rates, costs of lost work, and the number of simultaneous servers which they require.

Suggested Citation

  • Richard P. McLean & William W. Sharkey, 1998. "Alternative Methods for Cost Allocation in Stochastic Service Systems," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(1), July.
    • Handle: RePEc:bej:issued:v:1:y:1998:i:1:sharkey
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