One exact, but arbitrary, loss allocation rule presents itself immediately. Each MW could be charged with the incremental transmission loss when it joins its ‘predecessors’ (from the above accounting point of view) in the outflow line. Given p, the cost-sharing rules (13) and (14) above recover actual cost exactly. As noted before, with a convex cost function, the incremental loss attached to a MW will be higher, the larger the number of its predecessors in the outflow. The cost recovery rule has the efficiency-inducing marginal principle built into it, albeit in an unfair way: the charge depends critically on the order in which players are considered to enter the line, and this is based on the arbitrary labelling procedure. To modify this procedure and ensure fair treatment to all players we turn to the notion of coalitions.