Distributing Regional Services Costs

Regional systems to provide urban services must be designed not only on the basis of cost effectiveness but also with regard to a proper distribution of costs among the participants. The cost distribution should be equitable and stable (in the sense that incentives for groups to break away and form separate systems are minimized). Concepts of n-person cooperative game theory are utilized to develop quantitative measures of equity and stability. These measures are incorporated into linear programming models that allow explicit equity-stability tradeoffs to be made in distributing the costs of the least-cost regional service plan. Examples that demonstrate the use of the methods are provided.