Revenue sharing for resource reallocation among project activity contractors

Xiaowei Lin, Jing Zhou (), Lianmin Zhang and Yinlian Zeng
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Xiaowei Lin: Nanjing University
Jing Zhou: Nanjing University
Lianmin Zhang: Nanjing University
Yinlian Zeng: The Chinese University of Hong Kong

Annals of Operations Research, 2021, vol. 301, issue 1, No 9, 141 pages

Abstract: Abstract Outsourcing project activities to contractors has become more and more popular in recent years, and activity contractors can increase the revenue of a project through cooperation. In this paper we consider cooperation between activity contractors through resource reallocation, and address two main issues. First, we seek to find the optimal scheme for resource reallocation among contractors. To this end, a linear programming model is established, and some properties of the optimal resource reallocation scheme are discussed. Second, we propose several revenue sharing schemes for contractors based on a cooperative game theory framework. Three schemes are introduced and compared: a scheme in the core, the Shapley value, and a proportional revenue sharing scheme. We show that the cooperative game of activity contractors in a general project network does not necessarily have a nonempty core. However, we identify a special class of project network for which the core of the cooperative game of activity contractors always exists and an allocation in the core is proposed based on shadow prices. The managerial insights we obtain in this paper are as follows. (i) Contractors should cooperate. (ii) Resources should not be transferred between contractors with high transferring costs. (iii) Resources are always transferred from contractors on non-critical paths to contractors on critical paths, and on critical paths, resources are always transferred from low efficiency contractors to high efficiency contractors.

Keywords: Project management; Resource reallocation; Cooperative games; Revenue sharing; The core; The Shapley value; Separable revenue (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10479-020-03753-y

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