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The selection of joint projects by a consortium: Cost sharing mechanisms

Author

Listed:
  • J A Aloysius

    (University of Arkansas)

  • E C Rosenthal

    (Temple University)

Abstract

This paper considers the problem of project selection and cost allocation for a partly decentralised organisation such as a research consortium, whose members have conflicting preferences and limited budgets. Three normative properties that project selection and cost sharing mechanisms which should satisfy are proposed. We introduce a class of efficient mechanisms called willingness to pay that satisfies the properties and solves the interdependent selection and allocation mechanisms through mathematical programming. These mathematical programming procedures are shown first, to improve upon existing cost sharing plans used in practice, and second, to be undominated by any other selection and allocation mechanism that satisfies the properties. However, in the case of private information the procedures are not incentive compatible. For this case, we provide an incentive compatible, though inefficient, mechanism, and prove that no efficient mechanism can exist for this class of problems.

Suggested Citation

  • J A Aloysius & E C Rosenthal, 1999. "The selection of joint projects by a consortium: Cost sharing mechanisms," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 50(12), pages 1244-1251, December.
    • Handle: RePEc:pal:jorsoc:v:50:y:1999:i:12:d:10.1057_palgrave.jors.2600842
    DOI: 10.1057/palgrave.jors.2600842
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    Citations

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    Cited by:

    1. Eric Bahel & Christian Trudeau, 2013. "A discrete cost sharing model with technological cooperation," International Journal of Game Theory, Springer;Game Theory Society, vol. 42(2), pages 439-460, May.
    2. Aloysius, John A., 2002. "Research joint ventures: A cooperative game for competitors," European Journal of Operational Research, Elsevier, vol. 136(3), pages 591-602, February.
    3. Aloysius, John A., 1999. "Membership in a research consortium: the project selection game," Journal of Economic Behavior & Organization, Elsevier, vol. 40(3), pages 325-336, November.

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