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Cost Allocation with Limited Information

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  • Jens Leth Hougaard

    () (Department of Food and Resource Economics, University of Copenhagen)

  • Jørgen Tind

    (Department of Mathematical Sciences, University of Copenhagen)

Abstract

This article investigates progressive development of Aumann-Shapley cost allocation in a multilevel organizational or production structure. In particular, we study a linear parametric programming setup utilizing the Dantzig-Wolfe decomposition procedure. Typically cost allocation takes place after all activities have been performed, for example by finishing all outputs. Here the allocation is made progressively with suggestions for activities. I other words cost allocation is performed in parallel for example with a production planning process. This development does not require detailed information about some technical constraints in order to make the cost allocation.

Suggested Citation

  • Jens Leth Hougaard & Jørgen Tind, 2013. "Cost Allocation with Limited Information," MSAP Working Paper Series 01_2013, University of Copenhagen, Department of Food and Resource Economics.
  • Handle: RePEc:foi:msapwp:01_2013
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    File URL: http://okonomi.foi.dk/workingpapers/MSAPpdf/MSAP2013/MSAP_WP01_2013.pdf
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    References listed on IDEAS

    as
    1. Hougaard, Jens Leth & Tind, Jørgen, 2009. "Cost allocation and convex data envelopment," European Journal of Operational Research, Elsevier, vol. 194(3), pages 939-947, May.
    2. 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.
    3. William J. Baumol & Tibor Fabian, 1964. "Decomposition, Pricing for Decentralization and External Economies," Management Science, INFORMS, vol. 11(1), pages 1-32, September.
    4. Friedman, Eric & Moulin, Herve, 1999. "Three Methods to Share Joint Costs or Surplus," Journal of Economic Theory, Elsevier, vol. 87(2), pages 275-312, August.
    5. Moeseke, Paul V & Ghellinck, Guy, 1969. "Decentralization in Separable Programming," Econometrica, Econometric Society, vol. 37(1), pages 73-78, January.
    6. J. Barkley Rosser, 2009. "Introduction," Chapters,in: Handbook of Research on Complexity, chapter 1 Edward Elgar Publishing.
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    Keywords

    cost allocation; Aumann-Shapley prices; decomposition; parametric programming;

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