Application of Cost Allocation Concepts of Cooperative Game Theory Approach in Construction Industry

Mojtaba Valinejad Shoubi, Azin Shakiba Barough


Nowadays, conflicts between the involved parties in projects are common. In many practical situations, conflict regarding cost allocation arises between the involved parties. In the joint construction venture, dissatisfaction among involved participants regarding the ways of cost allocation is ordinary. Cooperative game theory approach was emerged as an effective approach which takes the principle of justice into account to provide adequate incentive to motivate the parties for participation in a joint venture. Recently, the game theory approach has been used as an effective framework in decision making about some problems and conflicts in some organization of construction industry such as subcontractors organization. There are various cost allocation methods in cooperative game theory approach such as the Shapley value, the Core, the Nucleolus, the SCRB methods, etc. In this paper, three concepts including the Shapley value, the SCRB and the Nucleolus related to joint cost allocation in subcontractor organization are investigated. A hypothetical case study is demonstrated to illustrate the issues may be arisen more comprehensively. Results indicate that these concepts provide both individual and group rationality for involved subcontractors which can avoid the negotiation regarding benefits and/or cost distributionbetween them.Keywords: Cost Allocation, Cooperative Game Theory, Construction Industry, The Shapley Value, The SCRB, The Nucleolus

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