Cost Allocation Rules for Elastic Single-Attribute Situations

Abstract

Many cooperative games, especially ones stemming from resource pooling in queuing or inventory systems, are based on situations in which each player is associated with a single attribute (a real number representing, say, a demand) and in which the cost to optimally serve any sum of attributes is described by an elastic function (which means that the per-demand cost is non-increasing in the total demand served). For this class of situations, we introduce and analyze several cost allocation rules: the proportional rule, the serial cost sharing rule, the benefit-proportional rule, and various Shapley-esque rules. We study their appeal with regard to fairness criteria such as coalitional rationality, benefit ordering, and relaxations thereof. After showing the impossibility of combining coalitional rationality and benefit ordering, we show for each of the cost allocation rules which fairness criteria it satisfies.

Keywords: Games/group decisions: cooperative, mathematics: convexity, inventory

JEL Classification: D74, D71