Quantifying Inefficiency of Fair Cost-Sharing Mechanisms for Sharing Economy

Abstract

Sharing economy is a distributed peer-to-peer economic paradigm, which gives rise to a variety of social interactions for economic purposes. One fundamental distributed decision-making process is coalition formation for sharing certain replaceable resources collaboratively, for example, sharing hotel rooms among travelers, sharing taxi-rides among passengers, and sharing regular passes among users. Motivated by the applications of sharing economy, this paper studies a coalition formation game subject to the capacity of $K$ participants per coalition. The participants in each coalition are supposed to split the associated cost according to a given cost-sharing mechanism. A stable coalition structure is established when no group of participants can opt out to form another coalition that leads to lower individual payments. We quantify the inefficiency of distributed decision-making processes under a cost-sharing mechanism by the strong price of anarchy (SPoA), comparing a worst-case stable coalition structure and a social optimum. In particular, we derive SPoA for common fair cost-sharing mechanisms (e.g., equal-split, proportional-split, egalitarian and Nash bargaining solutions of bargaining games, and usage based cost-sharing). We show that the SPoA for equal-split, proportional-split, and usage based cost-sharing (under certain conditions) is $Θ(\log K)$, whereas the one for egalitarian and Nash bargaining solutions is $O(\sqrt{K} \log K)$. Therefore, distributed decision-making processes under common fair cost-sharing mechanisms induce only moderate inefficiency.