Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2006/15: Cost allocation in collaborative forest transportation

Mikael Frisk (), Maud Göthe-Lundgren (), Kurt Jörnsten () and Mikael Rönnqvist ()
Additional contact information
Mikael Frisk: Skogforsk, Uppsala, Postal: Skogforsk , Uppsala Science Park, S-751 83 UPPSALA, Sweden
Maud Göthe-Lundgren: Department of Mathematics, Linköpings universitet, Postal: Department of Mathematics, Linköpings universitet, SE-581 83 Linköping, Sweden
Kurt Jörnsten: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway
Mikael Rönnqvist: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway

Abstract: Transportation planning is an important part of the wood flow chain in forestry. There are often several forest companies operating in the same region and co-ordination between two or more companies is rare. However, there is an increasing interest in collaborative planning as the potential savings are large, often in the range 5-15%. A key question is how savings should be distributed among the participants. In this paper we investigate a number of possibilities based on economic models including Shapley value, the nucleolus, separable and non-separable costs, shadow prices and volume weights. We also propose a new allocation method based on finding as equal relative profits as possible among the participants. A case study including eight forest companies is described and analyzed.

Keywords: Transportation; OR in natural resources; Supply chain management; Economics; Group decisions and negotiations; Linear programming

JEL-codes: L91; Q21; Q23

27 pages, November 3, 2006

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