Application of cost allocation concepts of game theory approach for cost sharing process

Abstract

Dissatisfaction among involved parties regarding the ways of cost allocation is ordinary in the joint ventures, since each party attempts to get more interest caused by making the coalition. Various cost allocation methods such as proportional methods, some methods in cooperative game theory approach and etc have been used for the purpose of cost sharing in the joint projects. In this study the Nucleolus, Shapley value and SCRB as the cost sharing concepts in game theory approach have been used to investigate their effectiveness in fairly joint cost allocation between parties involved in constructing the joint water supply system. Then the results derived from these methods have been compared with the results of the traditional proportional to population and demand methods. The results indicated that the proportional methods may not lead to a fairly cost allocation while the Nucleolus, SCRB and the Shapley value methods can establish adequate incentive for cooperation. © Maxwell Scientific Organization, 2013.