Responsibility and sharing the cost of cleaning a polluted river

Panfei Sun, Dongshuang Hou*, Hao Sun

*Corresponding author for this work

    Research output: Contribution to journalArticleAcademicpeer-review

    3 Citations (Scopus)

    Abstract

    Consider n firms (agents) located at a river, indexed by 1 , ⋯ , n from upstream to downstream. The pollution generated by these firms induce cleaning costs c 1 , ⋯ , c n , where c i is the cost for cleaning the water in region i (according to the local environmental standards). The corresponding cost allocation problem is highly interesting both in theory and practice. Among the most prominent allocation schemes are the so-called Local Responsibility and Upstream Equal Sharing. The first one allocates simply each local cost c i to the corresponding firm i. The second distributes each c i equally among firms 1 , ⋯ , i. We propose and characterize a dynamic scheme which, given a particular order of arrival, allocates the current total cost among the firms that have arrived so far. The corresponding expected allocation (w.r.t. a random arrival order) turns out to be a convex combination of the two schemes above.

    Original languageEnglish
    Pages (from-to)143-156
    Number of pages14
    JournalMathematical methods of operations research
    Volume89
    Issue number1
    DOIs
    Publication statusPublished - 19 Feb 2019

    Keywords

    • Axiomatization
    • Cost allocation
    • Local Responsibility Sharing
    • Upstream Equal Sharing

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