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Cost allocation in water resources development
Author(s) -
Young H. P.,
Okada N.,
Hashimoto T.
Publication year - 1982
Publication title -
water resources research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.863
H-Index - 217
eISSN - 1944-7973
pISSN - 0043-1397
DOI - 10.1029/wr018i003p00463
Subject(s) - shapley value , cooperative game theory , computer science , cost allocation , core (optical fiber) , normative , context (archaeology) , dual (grammatical number) , game theory , operations research , risk analysis (engineering) , microeconomics , mathematical optimization , environmental economics , economics , business , mathematics , art , telecommunications , paleontology , philosophy , literature , accounting , epistemology , biology
Different methods for allocating the joint costs of water supply projects among users are compared on the basis of certain commonsense principles of equity. We contrast the separable costs‐remaining benefits (SCRB) method with simple proportional allocation schemes and more sophisticated methods from cooperative game theory, including the Shapley value and variants of the core. Advantages and disadvantages of the methods in practice are examined using a regional water supply system in Sweden. It is argued that these principles provide a useful framework for choosing intelligently among methods. The appropriateness of a method depends on the context, especially on the reliability of information about costs and demands. The conclusion is that there is no one best method, although from a normative standpoint the SCRB method may be one of the worst.