Cost allocation for a regional wastewater treatment system

There are economies of scale in the construction of regional wastewater treatment systems. Effluent dischargers have the option of participating in a regional system or constructing separate smaller systems. In order to encourage participation in a regional system so that the economies are realized, the cost allocation method employed must offer economic incentives. The cost allocation problem is viewed in game theoretic terms, and the Shapley value (a game theory solution) is suggested as an allocation method. The method is applied to the Meramec River Basin in Missouri where eight dischargers are identified. The problems of application are discussed and the reactions of the eight dischargers are cited.