A cost allocation problem arising in hub–spoke network systems |
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Authors: | Nobuo Matsubayashi Masashi Umezawa Yasushi Masuda Hisakazu Nishino |
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Institution: | a Broadband IP Services Business Division, NTT Communications, Nishiikuta 5-9-19, Tama-ku, Kawasaki-shi, Kanagawa 214-0037, Japan;b Institute of Policy and Planning Sciences, University of Tsukuba, 1-1-1, Tennoudai, Tsukuba, Ibaraki 305-8573, Japan;c Department of Administration Engineering, Keio University, Hiyoshi 3-14-1, Kohoku-ku, Yokohama 223-8522, Japan |
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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. |
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Keywords: | Game theory Cost allocation Hub– spoke network system Non-excludability Core allocation Telecommunication network |
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