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.
(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.