1. (M21) There are three firms, represented by letters a, b, and c, connected to a distribution centre represented by letter x. The three firms want to connect to the distribution centre, either independently or collaborating with other firms. The costs of connection are: connecting firm a to the hub costs 6, connecting firm b to the hub costs 2, connecting firm c to the hub costs 7, connecting firm a to firm b costs 5, connecting firm b to firm c costs 4, and connecting firm a to firm c costs 3.

A) Draw a graph showing a network where the firms and the hub are the nodes and the edges are the connections. Indicate the costs of connection in an appropriate way. (5 marks)

b) How should the firms split the cost of connecting to the distribution centre according to the Shapley value? You must show your calculations in a table. (15 marks)