Allocating the Cost of Congestion with the Nucleolus

Gilles Reinhardt ()

Computational Economics, 2004, vol. 24, issue 1, 33 pages

Abstract: A natural approach to solve resource sharing problems is to model them as cooperative games and use the results to allocate the costs of the shared resource. The nucleolus, a solution concept derived from cooperative game theory, requires an exponential number of computations since the solution must adhere to individual and coalitional rationality conditions. Littlechild (1974) provides a linear algorithm which produces the nucleolus of a cost allocation game when the cost of a coalition is the cost of the largest player in that coalition. In this paper, we show that for a large class of congestion cost allocation games, where each player has an independent impact on the shared resource, we can nonetheless bypass all the computational complexity and derive allocations in closed form.

Date: 2004
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