A cost-sharing mechanism for multi-country partnerships in disaster preparedness

Jessica Rodríguez-Pereira, Burcu Balcik, Marie Ève Rancourt, Gilbert Laporte

Research output: Contribution to journalArticlepeer-review

29 Citations (SciVal)

Abstract

We study a multi-country disaster preparedness partnership involving the joint prepositioning of emergency relief items. Our focus is the Caribbean region, which faces increasing disaster threats due to weather-related events and has committed to share its resources for regional integration. We collaborate with the inter-governmental Caribbean Disaster and Emergency Management Agency (CDEMA), which is interested in creating a methodology to equitably (fairly) allocate the costs necessary to operationalize this commitment. We present alternative cost allocation methods among the partner countries by considering their risk level and their ability to pay. Specifically, we adapt some techniques such as the Shapley value, the equal profit method, and the alternative cost avoided method, and we also propose a new insurance-based allocation scheme to determine the country contributions. This mechanism, which is formulated as a linear programming model, sets country premiums by considering the expected value and the standard deviation of country demands and their gross national income. We discuss the structural properties of these methods and numerically evaluate their performance in achieving an equitable allocation scheme with respect to three equity indicators based on the Gini coefficient. Our proposed cost-sharing mechanism not only achieves superior solutions compared with other methodologies with respect to the proposed equity metrics, but is also computationally efficient. We numerically illustrate how it can be used to obtain alternative cost allocation plans by giving different weights to disaster risk and economic standing parameters, and we analyze the benefits and fairness of the partnership in a transparent way.

Original languageEnglish
Pages (from-to)4541-4565
Number of pages25
JournalProduction and Operations Management
Volume30
Issue number12
Early online date13 Mar 2021
DOIs
Publication statusPublished - 1 Jan 2022

Bibliographical note

Funding Information:
Thanks are due to the referees and editors for their valuable comments that helped improve the quality of this study. The authors are also grateful to Ronald Jackson from CDEMA for his significant support to this project and to Ann Langley for her input to the discussion on solidarity. Burcu Balcik was partially supported by a grant from the Scientific and Technological Research Council of Turkey (TUBITAK) 2219 program. Marie‐Ève Rancourt and Gilbert Laporte were funded by the Institute for Data Valorization (IVADO) and the Canadian Natural Sciences and Engineering Research Council under grants 2014‐03945 and 2015‐06189. Jessica Rodríguez‐Pereira was funded through a postdoctoral fellowship from grants provided by IVADO and the Canada Research Chair in Distribution Management. This support is gratefully acknowledged.

Funding

Thanks are due to the referees and editors for their valuable comments that helped improve the quality of this study. The authors are also grateful to Ronald Jackson from CDEMA for his significant support to this project and to Ann Langley for her input to the discussion on solidarity. Burcu Balcik was partially supported by a grant from the Scientific and Technological Research Council of Turkey (TUBITAK) 2219 program. Marie‐Ève Rancourt and Gilbert Laporte were funded by the Institute for Data Valorization (IVADO) and the Canadian Natural Sciences and Engineering Research Council under grants 2014‐03945 and 2015‐06189. Jessica Rodríguez‐Pereira was funded through a postdoctoral fellowship from grants provided by IVADO and the Canada Research Chair in Distribution Management. This support is gratefully acknowledged.

Keywords

  • cost sharing
  • disaster preparedness
  • insurance
  • multi-country partnerships
  • prepositioning

ASJC Scopus subject areas

  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering
  • Management of Technology and Innovation

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