Cost-allocation principles for pipeline capacity and usage

Salant, David and Watkins, G.C. (1996): Cost-allocation principles for pipeline capacity and usage. Published in: Energy Studies Review , Vol. 8, No. 2 (1996): pp. 91-101.

Abstract

This paper applies principles f rom game theory to the problem o f allocating the cost o f a shared facility, such as a pipeline. The theory o f cooperative games s t r ongl y suggest s t hat no method e x i s t s for allocating costs that wi l l achieve all major policy goals. We apply results from the theory o f cooperative games a n d principles o f cost allocation to assess some c o mmo n l y adopted rules for allocating costs and def i ni ng u n i t charges. Mos t notably, the postage-stamp toll is f o u n d to fail a mi ni mal set o f commonly applied principles.

• Item Type: MPRA Paper
• Language: English
• Keywords: cost allocation; pipeline
• Subjects: L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L95 - Gas Utilities ; Pipelines ; Water Utilities

References

Yo u n g , H. Pe y t o n (1994) ' Co s t Al l o c a t i o n , ' Ch a p . 34 i n Ro b e r t Au ma n n a n d Segi u Ha r t (eds.), The Handbook o f Game Theory, Volume I I ( Ams t e r d a m: No r t h - Ho l l a n d ) .

Le wi s , W. Ar t h u r (1949) Overhead Costs; Some Essays in Economic An a l y s i s ( Lo n d o n : G. Al l en & Unwi n) .