Capacity Sharing and Cost Allocation among Independent Firms with Congestion

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review

18 Scopus Citations
View graph of relations

Author(s)

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)1285-1310
Journal / PublicationProduction and Operations Management
Volume24
Issue number8
StatePublished - 1 Aug 2015

Abstract

We analyze the benefit of production/service capacity sharing for a set of independent firms. Firms have the choice of either operating their own production/service facilities or investing in a facility that is shared. Facilities are modeled as queueing systems with finite service rates. Firms decide on capacity levels (the service rate) to minimize delay costs and capacity investment costs possibly subject to service-level constraints on delay. If firms decide to operate a shared facility they must also decide on a scheme for sharing the capacity cost. We formulate the problem as a cooperative game and identify settings under which capacity sharing is beneficial and there is a cost allocation that is in the core under either the first-come, first-served policy or an optimal priority policy. We show that capacity sharing may not be beneficial in settings where firms have heterogeneous work contents and service variabilities. In such cases, we specify conditions under which capacity sharing may still be beneficial for a subset of the firms.

Research Area(s)

  • capacity sharing, cooperative game theory, cost allocation, joint ventures, queueing systems

Citation Format(s)

Capacity Sharing and Cost Allocation among Independent Firms with Congestion. / Yu, Yimin; Benjaafar, Saif; Gerchak, Yigal.

In: Production and Operations Management, Vol. 24, No. 8, 01.08.2015, p. 1285-1310.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review