Network cost allocation games based on threshold discounting

Consider networks in which each pair of nodes needs to communicate. The communication flow between any pair of nodes can be delivered through a direct link or via some connecting path in the network. By discounting the cost of flow through links for which the high flow volume is anticipated, network designers exploit economies of scale. This approach encourages the concentration of flows and use of relatively small number of links. This led to the design of well known hub networks and more recently hub-like networks. Applications include telecommunications, airline traffic flow, and mail delivery networks. The cost of services delivered through such networks is distributed among its users who may be individuals or organizations with possibly conflicting interests. The cooperation of these users is essential for the exploitation of economies of scale. Consequently, there is a need to find a fair distribution of the cost of providing the service among network users. In this paper, we present a survey of some recent results in the development of cooperative game theory based mechanisms to efficiently characterize cost allocation solutions for hub and hub-like networks. Specifically, we formulate the associated hub and hub-like network cost allocation games. Then, while paying special attention to users’ contribution to economies of scale, we demonstrate that some attractive cost allocation solutions, which provide users with the incentive to cooperate, can be efficiently computed.