A Practicable Cost-Allocation Method for Cooperative Settings

Jan Selders, Karl-Martin Ehrhart

Technical University of Karlsruhe, Institute for Economic Theory and Operations Research, Postfach 6980, 76128 Karlsruhe, Deutschland

Abstract: Cooperative game-theory offers solutions to cost-allocation in cooperative settings. Because of their complexity, these solutions are hard to apply in practice, for instance in market-like situations where each participant offers a commodity and asks for others' commodities, especially if the productions of such commodities are interdependent. We present an approach which provides strategically stable solutions in the sense of the core of a cooperative game and which does not depend on a characteristic function. Therefore, it may serve as a strategic guideline for the design of cost-sharing mechanisms that benefit larger and/or decentralized cooperations with structures of internal markets.

Keywords: cost-allocation, cooperative markets, subsidy-free prices.

Language: English