A cost allocation method for facilities siting with fixed-charge cost functions

Abstract

The fixed-charge plant location problem determines the sites at which to place central treatment facilities as well as the assignments of communities to those facilities. We show here that the mathematical programming dual of a special version of the plant location model provides cost allocations to the communities which satisfy the core conditions of an n-person cooperative game. These cost allocations are faulted- because they may fail to provide equity among the participants. A new methodology is proposed, the Separable Costs Opening Cost method (SCOC), to allocate costs among the participants once the optimal set of facilities and coalitions has been determined. The SCOC is guaranteed to determine allocations which are insidexhe core and hence increase the fairness of the allocation.

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