This paper presents a novel application of Shapley value decomposition to determine equitable cost-sharing plans for the operation and maintenance (O&M) of rural drinking water systems in Nepal. Rooted in cooperative game theory, the Shapley framework provides a fairness-based metric to divide financial responsibility among important stakeholders, such as households and the government, based on marginal contributions by each to the system. Utilizing a nationally representative survey of 9,600 households and targeted fieldwork in Rupandehi (Terai), Kaski (Hills), and Chitwan (Inner Terai), the analysis incorporates K-means clustering to identify regional cost-sharing profiles that represent institutional, ecological, and economic variation.
As per the analysis the ideal national contribution was determined to be 66.69% from the government and 33.31% from households. Significant geographic heterogeneity however, emerged which shows household contributions should be lowest to 26.42% in the Terai plains, and rises to 45.78% in the Inner Terai. Meanwhile the cost burden rises to 53.15% in hill regions. These discrepancies are a result of variations in household engagement, service delivery reach, and sunk costs associated with terrain. The results show that equity in infrastructure financing needs to be context-responsive, challenging one-size-fits-all co-finance formulas.
The study makes a methodological contribution to public infrastructure financing models by establishing mathematical equity principles under duress of real world governance complexity of real-world governance. Study also provides a proper policy prescription in creating sustainable co-finance plans under federalism. Philosophically study helps to address Fraser’s Crisis of Care by revaluing maintenance labor through a cooperative and equitable cost-sharing lens.