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Cost-allocation principles for pipeline capacity and usage

Author

Listed:
  • Salant, David
  • Watkins, G.C.

Abstract

This paper applies principles f rom game theory to the problem o f allocating the cost o f a shared facility, such as a pipeline. The theory o f cooperative games s t r ongl y suggest s t hat no method e x i s t s for allocating costs that wi l l achieve all major policy goals. We apply results from the theory o f cooperative games a n d principles o f cost allocation to assess some c o mmo n l y adopted rules for allocating costs and def i ni ng u n i t charges. Mos t notably, the postage-stamp toll is f o u n d to fail a mi ni mal set o f commonly applied principles.

Suggested Citation

  • Salant, David & Watkins, G.C., 1996. "Cost-allocation principles for pipeline capacity and usage," MPRA Paper 12090, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:12090
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    File URL: https://mpra.ub.uni-muenchen.de/12090/1/MPRA_paper_12090.pdf
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    More about this item

    Keywords

    cost allocation; pipeline;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

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