Allocating the gains from resource pooling with the Shapley Value

G. Reinhardt, M. Dada

Research output: Contribution to journalArticle

Abstract

To make their cost structure more efficient, firms often pool their critical resources: small divisions of a large firm may negotiate a joint contract to benefit from volume discounts; or firms may outsource their call centres to an independent provider who is able to increase utilization by reducing variability since demand is now pooled. Since pooling demand reduces total joint costs, an immediate question is how the realized savings should be shared. We model the problem as a cooperative game and use the resulting allocation schemes to distribute the savings. One popular scheme is the Shapley Value, which always exists and, we show, represents each player's incremental value to the pool. When the pooled savings depend on the sum of each player's demand, we label the game coalition symmetric and propose, for those games, an algorithm that makes pseudo-polynomial the computation of the Shapley Value.

Original languageEnglish (US)
Pages (from-to)997-1000
Number of pages4
JournalJournal of the Operational Research Society
Volume56
Issue number8
DOIs
StatePublished - Aug 2005
Externally publishedYes

Keywords

  • Allocation
  • Computational analysis
  • Costing
  • Game theory

ASJC Scopus subject areas

  • Management Information Systems
  • Strategy and Management
  • Management Science and Operations Research
  • Marketing

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