Manipulability of Cost and Benefit Allocation in Cross-border Electrical Interconnection Projects

Cross-border electrical interconnection projects are getting more attention all over the world. In this context, cost-benefit allocation is especially important due to the need for fair sharing of power trading benefits among the countries as well as allocating the investments in capital-intensive power lines. One convenient way of dealing with these issues is using cooperative game theory. However, even fair allocation methods, such as the Shapley value, do not guarantee the stability of negotiations on cross-border interconnection projects. The result of the allocation process strongly depends on the individual system’s data provided by each party involved. In this regard, the parties could have incentives to strategically provide data that would benefit themselves in the cost-benefit allocation process, potentially hindering the stability of the coalition. In this paper, we address the negotiation stability issues in terms of players strategic behavior and manipulability of cost-benefit allocation rules.