- The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development
Edited by Carlo Carraro and Vito Fragnelli
5. 1. Cost sharing in a joint project1 Stef Hendrikus Tijs and Rodica Brânzei INTRODUCTION Cooperation is an essential part of human interaction. Environmental problems in particular call for cooperation. Game theory can contribute to smoothing cooperation by developing attractive and transparent rules for the allocation of costs or rewards among the participants in joint projects. There is a huge literature dealing with cost sharing problems using game theory. For surveys see Tijs and Driessen (1986) and Young (1994). In this chapter we consider situations where agents plan to cooperate in a complex project. The agents have to decide about the form of the project and about the associated cost sharing. Both facets depend on the relevant costs and the budgets (which we identify with the willingness to pay and the rewards) of the agents for the diﬀerent forms which the project may ﬁnally take. Our model can be used, for example, for the following: cooperation in irrigation systems (cf. Aadland and Kolpin, 1998; Kolpin and Aadland, 2001), airport landing networks (cf. Brânzei et al., 2002; Koster et al., 2001, Littlechild and Thompson, 1977; Potters and Sudhölter, 1999), railway networks with facilities (Fragnelli et al., 2000; Norde et al., 2002), and also car pooling, sharing a clubhouse and sharing playing-ﬁelds by diﬀerent clubs and so on. In an irrigation system the wishes of the participants diﬀer and are determined by the position of the pieces of land owned by the participants. In a...
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