The selection of joint projects by a consortium: Cost sharing mechanisms

J A Aloysius and E C Rosenthal
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J A Aloysius: University of Arkansas
E C Rosenthal: Temple University

Journal of the Operational Research Society, 1999, vol. 50, issue 12, 1244-1251

Abstract: Abstract This paper considers the problem of project selection and cost allocation for a partly decentralised organisation such as a research consortium, whose members have conflicting preferences and limited budgets. Three normative properties that project selection and cost sharing mechanisms which should satisfy are proposed. We introduce a class of efficient mechanisms called willingness to pay that satisfies the properties and solves the interdependent selection and allocation mechanisms through mathematical programming. These mathematical programming procedures are shown first, to improve upon existing cost sharing plans used in practice, and second, to be undominated by any other selection and allocation mechanism that satisfies the properties. However, in the case of private information the procedures are not incentive compatible. For this case, we provide an incentive compatible, though inefficient, mechanism, and prove that no efficient mechanism can exist for this class of problems.

Keywords: project selection; cost allocation; capital budgeting; game theory; integer programming (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (3)

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DOI: 10.1057/palgrave.jors.2600842

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