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On Cost Allocation in Hub-Like Networks

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  • Darko Skorin-Kapov

Abstract

We consider telecommunication network design in which each pair of nodes can communicate via a direct link and the communication flow can be delivered through any path in the network. The cost of flow through each link is discounted if and only if the amount of flow exceeds a certain threshold. This exploitation of economies of scale encourages the concentration of flows and use of relatively small number of links. We will call such networks hub-like networks. The cost of services delivered through a hub-like network is distributed among its users who may be individuals or organizations with possibly conflicting interests. The cooperation of these users is essential for the exploitation of economies of scale. Consequently, there is a need to find a fair distribution of the cost of providing the service among users of such network. In order to describe this cost allocation problem we formulate the associated cooperative game, to be referred to as the hub-like game. Special attention is paid to users' contribution to economies of scale. We then demonstrate that certain cost allocation solutions (the core and the nucleolus of the hub-like game), which provide users with the incentive to cooperate, can be efficiently characterized. Copyright Kluwer Academic Publishers 2001

Suggested Citation

  • Darko Skorin-Kapov, 2001. "On Cost Allocation in Hub-Like Networks," Annals of Operations Research, Springer, vol. 106(1), pages 63-78, September.
    • Handle: RePEc:spr:annopr:v:106:y:2001:i:1:p:63-78:10.1023/a:1014505607701
    DOI: 10.1023/A:1014505607701
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    Citations

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    Cited by:

    1. Skorin-Kapov, Darko & Skorin-Kapov, Jadranka, 2005. "Threshold based discounting networks: The cost allocation provided by the nucleolus," European Journal of Operational Research, Elsevier, vol. 166(1), pages 154-159, October.
    2. G. Bergantiños & J. Vidal-Puga, 2020. "One-way and two-way cost allocation in hub network problems," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 42(1), pages 199-234, March.
    3. Kratica, Jozef & Stanimirovic, Zorica & Tosic, Dusan & Filipovic, Vladimir, 2007. "Two genetic algorithms for solving the uncapacitated single allocation p-hub median problem," European Journal of Operational Research, Elsevier, vol. 182(1), pages 15-28, October.
    4. Cruijssen, F. & Borm, P.E.M. & Dullaert, W. & Hamers, H.J.M., 2007. "Joint Hub Network Development," Discussion Paper 2007-76, Tilburg University, Center for Economic Research.
    5. Cruijssen, F., 2006. "Horizontal cooperation in transport and logistics," Other publications TiSEM ab6dbe68-aebc-4b03-8eea-d, Tilburg University, School of Economics and Management.
    6. M. Khodabakhshi & K. Aryavash, 2014. "The fair allocation of common fixed cost or revenue using DEA concept," Annals of Operations Research, Springer, vol. 214(1), pages 187-194, March.

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