Knaster Inheritance procedure

[cruz33]

I resolved this problem, but the final settlement seems off (too low). Am I missing something? This is the problem: If John bids $28,225 and Mary bids $32,100 on their agingparent’s old classic car, which they no longer drive, how would you reach afair division? Calculate this using the Knaster Inheritance procedure.

Step 1: what each thinks the car is worth

John: $28,225
Mary: $32,100

Step 2: initial allocation
Mary – highest bidder, is given the car

Now the winner has to pay out the loser a fair share. Maryplaces $16.050 into a "kitty" and the losing heir gets to withdraw1/2 of the value he bid ($14.112.5).

$16.050 - $14.112.50 = 1.937.50

This leaves $1.937.50 in the kitty, which is distributedequally to all heirs (Mary and John).

$1.937.50 ÷ 2 = $968.75

Step3: finalsettlement

The final distribution is:

Mary: she gets the car, plus $968.75

John: he gets $968.75

 

[mmm4444bot]

I googled keywords 'knaster inheritance procedure', and the two sites I looked at indicate that the winner puts their entire bid into the kitty. Then, each person withdraws half of their bid.

Do your materials differ, on this part?

 

[JeffM]

I resolved this problem, but the final settlement seems off (too low). Am I missing something? This is the problem: If John bids $28,225 and Mary bids $32,100 on their agingparent’s old classic car, which they no longer drive, how would you reach afair division? Calculate this using the Knaster Inheritance procedure.

Step 1: what each thinks the car is worth

John: $28,225
Mary: $32,100

Step 2: initial allocation
Mary – highest bidder, is given the car Actually she buys the car.

Now the winner has to pay out the loser a fair share. Maryplaces $16.050 into a "kitty" and the losing heir gets to withdraw1/2 of the value he bid ($14.112.5).

$16.050 - $14.112.50 = 1.937.50

This leaves $1.937.50 in the kitty, which is distributedequally to all heirs (Mary and John).

$1.937.50 ÷ 2 = $968.75

Step3: finalsettlement

The final distribution is:

Mary: she gets the car, plus $968.75

John: he gets $968.75 Plus $14,112.50

So Mary pays (net) $16,050.00 - $968.75 = $15,081.25 for a car that she values at $32,100. She feels ahead by 32,100 - 15,081.25 = 17,018.75

John gets $14,112.50 + $968.75 = 15,081.25. So he got better than half of what he perceives the car to be worth. Moreover, from his perspective, Mary overpaid him for the car.

 

[cruz33]

So Mary pays (net) $16,050.00 - $968.75 = $15,081.25 for a car that she values at $32,100. She feels ahead by 32,100 - 15,081.25 = 17,018.75

John gets $14,112.50 + $968.75 = 15,081.25. So he got better than half of what he perceives the car to be worth. Moreover, from his perspective, Mary overpaid him for the car.

THANK YOU!!! I found out what I was missing!