Fair cost allocation schemes

Abstract

A class of allocation schemes is axiomatized for the allocation of variable costs to activities performed sequentially when their order of performance is not fixed in advance and costs depend on this order. An upper bound on the amount charged to each activity is assumed to be given. This bound is independent of the processing order and can be more or less than the cost the activity would incur if it were performed alone. Our axioms for fair allocation lead to a restricted (but nonunique) class of allocation schemes whose restrictions depend on whether the sum of the bounds is less than or more than the sum of the costs incurred when each activity is performed alone.