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

 

Finishing up example I started in class with Jarrett, Eva Jane, Lindsay, and Jill.Iím 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.

 

Itís a complicated process, and Tina Schuster will give you another example on Wednesday 30 August.Iíll just summarize the steps again:

 

(a)  Each person writes down a ďsealed bidĒ for how much each object is worth to them.These will of course be different for each person. Itís important to be honest, otherwise you are likely to lose out.

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

(c)  The actual objects go to the highest bidders.

(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.