TY - GEN
T1 - Allocation of Recurring Fixed Costs According to Partners’ Varying Revenues in Professional Services
AU - Khmelnitsky, Eugene
AU - Gerchak, Yigal
N1 - Publisher Copyright:
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024.
PY - 2024
Y1 - 2024
N2 - We consider professional service providers, such as lawyers and physicians, who essentially work independently, but share an office or clinic. They need to jointly cover recurring fixed costs, like rent and staff wages, in every period. It is often argued that such costs should be allocated based on usage of the facilities. A more quantifiable indirect indicator of usage is the revenues. As partners’ revenues fluctuate over time, it is plausible to require, as we do in this study, that their shares in the fixed costs fluctuate accordingly. Had partners’ revenues not fluctuated, the deterministic cost allocation problem would be mathematically equivalent to the bankruptcy problem. Ours is a dynamic stochastic model of cost allocation for which we examine some ex-ante mechanisms based on partners’ portions of total revenue. Monotonicity, proportionality, and other properties of the suggested mechanisms are studied.
AB - We consider professional service providers, such as lawyers and physicians, who essentially work independently, but share an office or clinic. They need to jointly cover recurring fixed costs, like rent and staff wages, in every period. It is often argued that such costs should be allocated based on usage of the facilities. A more quantifiable indirect indicator of usage is the revenues. As partners’ revenues fluctuate over time, it is plausible to require, as we do in this study, that their shares in the fixed costs fluctuate accordingly. Had partners’ revenues not fluctuated, the deterministic cost allocation problem would be mathematically equivalent to the bankruptcy problem. Ours is a dynamic stochastic model of cost allocation for which we examine some ex-ante mechanisms based on partners’ portions of total revenue. Monotonicity, proportionality, and other properties of the suggested mechanisms are studied.
KW - cost allocation
KW - facility sharing
KW - gamma distributions
KW - professional services
KW - revenue ratios
UR - http://www.scopus.com/inward/record.url?scp=85194061645&partnerID=8YFLogxK
U2 - 10.1007/978-3-031-59373-4_11
DO - 10.1007/978-3-031-59373-4_11
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AN - SCOPUS:85194061645
SN - 9783031593727
T3 - Lecture Notes in Business Information Processing
SP - 130
EP - 141
BT - Human-Centric Decision and Negotiation Support for Societal Transitions - 24th International Conference on Group Decision and Negotiation, GDN 2024, Proceedings
A2 - Campos Ferreira, Marta
A2 - Wachowicz, Thomasz
A2 - Zaraté, Pascale
A2 - Maemura, Yu
PB - Springer Science and Business Media Deutschland GmbH
T2 - 24th International Conference on Group Decision and Negotiation, GDN 2024
Y2 - 2 June 2024 through 5 June 2024
ER -