Flood Protection Cost Allocation Using Cooperative Game Theory for Adapting Infrastructure to Climate Change

Abstract

The adaptation of infrastructure to climate change has benefits in the form of reduced disaster damage within the associated area. The beneficiaries of this adaptation are parties who are motivated to take adaptation actions and share the cost of adaptation. However, a standard for investment cost allocation has not been established. This study suggests a framework for allocating the adaptation cost among participants based on cooperative game theory. Within the game theory, the Shapley value is used for cost allocation based on an estimation of adaptation benefits and cost. To demonstrate the framework, a case study was conducted using an underground floodway project in Seoul, South Korea with six participants. The allocated cost decreases for participants who contribute more to saving the construction cost, whereas it increases for those who benefit more from flood damage prevention. In addition, geographic advantages in cooperation among players promote the chances of reducing the construction cost. This study is expected to assist decision makers in developing an agreement for financing an adaptation project through a rational cost allocation process.