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Game Theory and Cost Allocation Problems

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Author Info

  • S. H. Tijs

    (Department of Mathematics, University of Nijmegen, Toernooiveld, 6525 ED Nijmegen, The Netherlands)

  • T. S. H. Driessen

    (Department of Applied Mathematics, Twente University of Technology, 7500 AE Enschede, The Netherlands)

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    Abstract

    Problems of allocating joint costs in a reasonable way arise in many practical situations where people decide to work together to save costs. Cost allocation methods based on game theoretical concepts take into account the strategic aspects of cost allocation situations. We give a survey of cost allocation methods based on the nucleolus and the Shapley value, and introduce also a new one, the so-called cost gap allocation method which is based on the \tau -value. It is shown that for some large subclasses of cost allocation problems this new cost allocation method coincides with old separable cost methods proposed in the thirties by the Tennessee Valley Authority and also with the separable costs-remaining benefits (SCRB) method. Properties of this cost gap allocation method are also treated.

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    File URL: http://dx.doi.org/10.1287/mnsc.32.8.1015
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 32 (1986)
    Issue (Month): 8 (August)
    Pages: 1015-1028

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    Handle: RePEc:inm:ormnsc:v:32:y:1986:i:8:p:1015-1028

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    Related research

    Keywords: cost allocation method;

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    Cited by:
    1. Salant, David J, 2007. "Formulas for fair, reasonable and non-discriminatory royalty determination," MPRA Paper 8569, University Library of Munich, Germany.
    2. Norde, Henk & Fragnelli, Vito & Garcia-Jurado, Ignacio & Patrone, Fioravante & Tijs, Stef, 2002. "Balancedness of infrastructure cost games," European Journal of Operational Research, Elsevier, vol. 136(3), pages 635-654, February.
    3. Tijs, S.H. & Brânzei, R., 2004. "Cases in Cooperation and Cutting the Cake," Discussion Paper 2004-108, Tilburg University, Center for Economic Research.
    4. Koster, Maurice & Tijs, Stef & Borm, Peter, 1998. "Serial cost sharing methods for multi-commodity situations," Mathematical Social Sciences, Elsevier, vol. 36(3), pages 229-242, December.
    5. Massol, Olivier & Tchung-Ming, Stéphane, 2010. "Cooperation among liquefied natural gas suppliers: Is rationalization the sole objective?," Energy Economics, Elsevier, vol. 32(4), pages 933-947, July.
    6. Casas-Mendez, Balbina & Garcia-Jurado, Ignacio & van den Nouweland, Anne & Vazquez-Brage, Margarita, 2003. "An extension of the [tau]-value to games with coalition structures," European Journal of Operational Research, Elsevier, vol. 148(3), pages 494-513, August.
    7. Castano-Pardo, Alberto & Garcia-Diaz, Alberto, 1995. "Highway cost allocation: An application of the theory of nonatomic games," Transportation Research Part A: Policy and Practice, Elsevier, vol. 29(3), pages 187-203, May.
    8. Koster, M.A.L., 1998. "Multi-Service Serial Cost Sharing: A Characterization of the Moulin-Shenker Rule," Discussion Paper 1998-06, Tilburg University, Center for Economic Research.
    9. Alparslan-Gok, S.Z. & Brânzei, R. & Tijs, S.H., 2008. "Cooperative Interval Games Arising from Airport Situations with Interval Data," Discussion Paper 2008-57, Tilburg University, Center for Economic Research.
    10. Grahn-Voorneveld, Sofia, 2011. "Sharing costs in Swedish road ownership associations," Working papers in Transport Economics 2011:6, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    11. Brânzei, R. & Ferrari, G. & Fragnelli, V. & Tijs, S.H., 2002. "Two approaches to the problem of sharing delay costs in joint projects," Open Access publications from Tilburg University urn:nbn:nl:ui:12-91324, Tilburg University.
    12. Vásquez-Brage, M. & Nouweland, C.G.A.M. van den & García-Jurado, I., 1995. "Owen's coalitional value and aircraft landing fees," Discussion Paper 1995-104, Tilburg University, Center for Economic Research.
    13. Fragnelli, Vito & Garcia-Jurado, Ignacio & Mendez-Naya, Luciano, 2004. "A note on bus games," Economics Letters, Elsevier, vol. 82(1), pages 99-106, January.
    14. Frisk, Mikael & Göthe-Lundgren, Maud & Jörnsten, Kurt & Rönnqvist, Mikael, 2006. "Cost allocation in collaborative forest transportation," Discussion Papers 2006/15, Department of Finance and Management Science, Norwegian School of Economics.
    15. Carmen Herrero Blanco & Paula González, 2001. "Optimal Sharing Of Surgical Costs In The Presence Of Queues," Working Papers. Serie AD 2001-27, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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