Proportional Cost Sharing is a simple mechanism for a cooperative enterprise to set member prices that ensures members are maximizing savings while ensuring the cooperative will always fully cover costs. It is most suited to sharing fixed costs to provision resources whose usage can be granularly tracked and linearly measured.
- Usage of the resource by each member is tracked and measured.
- Cost sharing happens on some repeating schedule of time periods decided by the membership. Time periods could be as short as a day or as long as a year.
- At the end of each time period usage is aggregated and each member's percentage share calculated.
- The member pays the percentage share of costs.
If usage of resources also incurs marginal costs that can be easily and fully attributable to individual members, those marginal costs can and likely should be passed through directly to that member.
It is also likely prudent for a realtime system to allow members to know their current assessed usage and cost proportion, rather than being surprised at the end of the time period.
Examples of costs that are most naturally offset using Proportional Cost Sharing:
- Staff salaries
- Real estate costs
- Largely stable utility costs
Cooperatives can still build in cost buffers, "rainy day" savings, and long term investment by simply including these outlays among the shared expenses.
Fixed prices as spending caps
Proportional Cost Sharing can be hybridized with normal fixed prices by using fixed prices as a maximum on member expenditures. So Proportional Cost Sharing is used, but member costs are capped by what they would have spent under fixed pricing.
This is possibly appropriate in situations where some set of costs is highly variable, in startup phases where capital has been raised and cooperative costs are higher than members can be reasonably expected to directly support.
Spending caps would likely be very appropriate as a way of directly moderating the "rainy day" outlays mentioned above, since such costs are strictly optional. So for example a cooperative could always use Proportional Cost Sharing for mandatory costs such as for real estate and salaries, but decrease savings and buffer account outlays if their fully amounts would require members to pay higher than the fixed price cap.
Compared to patronage dividends
Proportional Cost Sharing stands in contrast to patronage dividends, wherein cooperative profits are refunded back to members on a fixed schedule in proportion to their expenditures and investment.
This model likely works very well for certain kinds of cooperatives where members are much more reasonably required to regularly invest in the cooperative, such as agricultural infrastructure. But it seems a clunky fit for internet cooperatives where member expenditure is much more highly variable, different members can have very different levels of involvement, and a more "frictionless" and simple model of member engagement is desired.
When shared resources are congestible
Sometimes resources more closely resemble "fixed capacity networks", such as roads or communications bandwidth, where percentage of usage at any particular time is more important than raw total usage over time. In these situations something closer to congestion pricing is appropriate. The question of how exactly to share such costs in the context of a cooperative enterprise is left open for now.