Cost allocation of multiagency water resource projects: game theoretic approaches and case study

Abstract

Water resource projects are often jointly carried out by a number of communities and agencies. Participation in a joint project depends on how costs are allocated among the participants and how cost shares compare with the cost of independent projects. Cooperative N-person game theory offers approaches which yield cost allocations that satisfy rationality conditions favoring participation. A new solution concept, the normalized nucleolus, is discussed and applied to a water re-use project in southern California. Results obtained with the normalized nucleolus are compared with those derived with more traditional solution concepts, namely, the nucleolus and the Shapley valley. -Authors