Cost allocation in water resources development

Young, H.P., Okada, N., & Hashimoto, T. (1982). Cost allocation in water resources development. Water Resources Research 18 (3) 463-475. 10.1029/WR018i003p00463.

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Abstract

Different methods for allocating the joint costs of water supply projects among users are compared on the basis of certain commonsense principles of equity. We contrast the separable costs-remaining benefits (SCRB) method with simple proportional allocation schemes and more sophisticated methods from cooperative game theory, including the Shapley value and variants of the core. Advantages and disadvantages of the methods in practice are examined using a regional water supply system in Sweden. It is argued that these principles provide a useful framework for choosing intelligently among methods. The appropriateness of a method depends on the context, especially on the reliability of information about costs and demands. The conclusion is that there is no one best method, although from a normative standpoint the SCRB method may be one of the worst.

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