A cost allocation problem arising in hub-spoke network systems

Nobuo Matsubayashi, Masashi Umezawa, Yasushi Masuda, Hisakazu Nishino

Research output: Contribution to journalArticlepeer-review

25 Citations (Scopus)

Abstract

This paper studies a cost allocation problem arising from hub-spoke network systems. When a large-scale network is to be constructed jointly by several agents, both the optimal network design and the fair allocation of its cost are essential issues. We formulate this problem as a cooperative game and analyze the core allocation, which is a widely used solution concept. The core of this game is not necessarily non-empty as shown by an example. A reasonable scheme is to allocate the cost proportional to the flow that an agent generates. We show that, if the demand across the system has a block structure and the fixed cost is high, this cost allocation scheme belongs to the core. Numerical experiments are given with real telecommunication traffic data in order to illustrate the usefulness of our analytical findings.

Original languageEnglish
Pages (from-to)821-838
Number of pages18
JournalEuropean Journal of Operational Research
Volume160
Issue number3 SPEC. ISS.
DOIs
Publication statusPublished - 2005 Feb 1

Keywords

  • Core allocation
  • Cost allocation
  • Game theory
  • Hub-spoke network system
  • Non-excludability
  • Telecommunication network

ASJC Scopus subject areas

  • Computer Science(all)
  • Modelling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

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