Method of Sealed Bids (Class example, Monday 28 August 2006)

Method of Sealed Bids (Class example, Monday 28 August 2006)

Finishing up example I started in class with Jarrett, Eva Jane, Lindsay, and Jill. I’m going to list amounts in thousands of dollars, to save zeroes.

Name	Jarrett	Eva Jane	Lindsay	Jill
House bid	800	1200	1400	1500 = high
Violin bid	120 = high	80	0	4
Painting bid	400	600 = high	500	300
Total estate	1320	1880	1900	1804
Fair share	330	470	475	451
What gets?	violin	painting	nothing	house
To estate*	-210	+130	-475	+1049
Excess back	121	121	121	121
Value	451	591	596	572

*+ means they pay into the estate, - means they get money out of the estate. The total into the estate is (-210)+(+130)+(-475)+(+1049) = 484 in this case, which gets divided 4 ways into 121 to each person.

It’s a complicated process, and Tina Schuster will give you another example on Wednesday 30 August. I’ll just summarize the steps again:

(a) Each person writes down a “sealed bid” for how much each object is worth to them. These will of course be different for each person. It’s important to be honest, otherwise you are likely to lose out.

(b) Each person’s bids are added up to get that person’s value of the entire estate. That person’s fair share is his or her total value divided by the number of people.

(d) If someone gets one of more objects, they pay into the estate the difference between their fair share and their value of the objects they got. If someone does not get any objects, they get their fair share out of the estate.

(e) There will ALWAYS be money left over in the estate! This gets divided equally. Therefore each person gets their fair share, plus a chunk extra. EVERYONE ends up unreasonably happy! (NOTE that it does not matter that people end up with actual different dollar amounts. The important thing is that each end up with what he or she personally considers fair, plus the same additional dollar amount.