1. Chapter 3
Fair Division

2. Fair Division- Underlying Elements
The goods (or booty).
This is the informal name we will give to the item(s) being divided and is denoted by S.
The players.
They are the players in the game.
The value systems.
Each player has an internalized value system.

3. Fair Division Fair Share
Suppose that s denotes a share of the booty S and P is one of the players in a fair division game with N players. We will say that s is a fair share to player P if s is worth at least 1/Nth of the total value of S in the opinion of P.

4. Fair Division- Types of Games
Continuous
The set S is divisible.
Discrete
The set S is indivisible.
Mixed
Some are continuous and some discrete.

5. Fair Division Assumptions
Players are rational
(ii) Privacy: Players do not know other player’s value system (who prefers chocolate over vanilla etc.)
(iii) Cooperation; agree to basic rules
(iv) Symmetry of rights

6. Fair-Division Problems
Fair-division problems involve fairly dividing something between two or more people, without the aid of an outside arbitrator.
The people who will share the object are called players.
The solution to a problem is called a fair-division procedure or a fair-division scheme.

7. Types of Fair-Division, cont’d
Continuous fair-division problems:
The object(s) can be divided into pieces of any size with no loss of value.
An example is dividing a cake or an amount of money among two or more people.
Discrete fair-division problems:
The object(s) will lose value if divided.
We assume the players do not want to sell everything and divide the proceeds.
However, sometimes money must be used when no other fair division is possible
An example is dividing a car, a house, and a boat among two or more people.

8. Types of Fair-Division, cont’d
Mixed fair-division problems:
Some objects to be shared can be divided and some cannot.
This type is a combination of continuous and discrete fair division.
An example is dividing an estate consisting of money, a house, and a car among two or more people.

9. continuous fair-division problems
We make the assumption that the value of a player’s share is determined by his or her values.
Different players may value the same share differently.
We assume that a player’s values in a fair-division problem cannot change based on the results of the division.
We also assume that no player has any knowledge of any other player’s values.

10. Fair Division for Two Players
The standard procedure for a continuous fair-division problem with two players is called the divider-and-chooser method.
This method is described as dividing a cake, but it can be used to fairly divide any continuous object.

11. Two Players: The Divider-Chooser Method
Two players, X and Y, are to divide a cake. Say X decides to be the divider (by coin flip)
The divider X divides the cake into 2 pieces that he or she considers to be of equal value.
The chooser Player Y picks the piece he or she considers to be of greater value.
Player X gets the piece that player Y did not choose.

12. Divider-And-Chooser Method
This method produces a proportional division.
The divider thinks both pieces are equal, so the divider gets a fair share.
The chooser will find at least one of the pieces to be a fair share or more than a fair share. The chooser selects that piece, and gets a fair share.

13. Fair Division
Two Players: The Divider-Chooser Method

14. Fair Division
Two Players: The Divider-Chooser Method

15. Fair Division for 3 players. The Lone-Divider Method
Preliminaries. One of the three players will be the divider; the other two players will be choosers. We’ll call the divider D and the choosers C1 and C2 .
Step 1 ( Division). The divider D divides the cake into three pieces (s1 , s2 and s3 .) D will get one of these pieces, but at this point does not know which one. (Not knowing which of the pieces will be his share is critical– it forces D to divide the cake equally).

16. The Lone-Divider Method for Three Players
Step 2 ( Bidding). C1 declares (usually by writing on a slip of paper) which of the three pieces are fair shares to her. Independently, C2 does the same. These are the chooser’ bid lists. A choosers bid list should include every piece that he or she values to be a fair share
Step 3 ( Distribution). Who gets the piece? The answer depends on the bid lists. For convenience, we will separate the pieces into two groups: chosen pieces (let’s call them C- pieces), and unwanted pieces (let’s call them U- pieces).

17. The Lone-Divider Method for More Than Three Players Problems: 3. 24, 3

18. The Lone-Divider Method for More Than Three Players
Preliminaries. One of the players will be the divider D; and the remaining players are going to be all choosers. As always, it’s better to be a chooser than a divider.
Step 1 ( Division). The divider D divides the set S into N shares
D is guaranteed of getting one of these share, but doesn’t know which one.
Step 2 ( Bidding). Each of the choosers independently submits a bid list consisting of every share that he or she considers to be a fair share (1/Nth or more of S).
Step 3 ( Distribution). The bid lists are opened.

19. The Lone-Chooser Method
Fair Division
The Lone-Chooser Method

20. The Lone-Chooser Method for Three Players
Preliminaries. We have one chooser and two dividers. Let’s call the chooser C and the dividers D1 and D2 . As usual, we decide who is what by a random draw.
Step 1 ( Division). D1 and D2 divide S between themselves into two fair shares. To do this, they use the divider-chooser method. Let’s say that D1 ends with S1 and D2 ends with S2 .

21. The Lone-Chooser Method for Three Players
Step 2 (Subdivision). Each divider divides his or her share into three subshares. Thus D1 divides S1 into three subshares, which we will call S1a, S1b and S1c . Likewise, D2 divides S2 into three subshares, which we will call S2a,
S2b and S2c .

22. The Lone-Chooser Method for Three Players
Step 3 (Selection). The chooser C now selects one of D1 ‘s three subshares and one of D2 ‘s three subshares. These two subshares make up C’s final share. D1 then keeps the remaining two subshares from S1 , and D2 keeps the remaining two subshares from S2 .

23. The Last-Diminisher Method
Fair Division
The Last-Diminisher Method

24. The Last-Diminisher Method
Preliminaries. Before the game starts the players are randomly assigned an order of play. The game is played in rounds, and at the end of the each round there is one fewer player and a smaller S to be divided.

25. The Last-Diminisher Method
Round 1. P1 kicks the off by “cutting” for herself a 1/Nth share of S. This will be the current C-piece, and P1 is its claimant. P1 does not know whether or not she will end up with this share.
P2 comes next and has a choice: pass or diminish

26. The Last-Diminisher Method
(Round 1 continued). P3 comes next and has the same opportunity as P2 : Pass or diminish the current C-piece.
The round continues this way, each player in turn having an opportunity to pass or diminish.

27. 3 #44,48 The Last-Diminisher Method-Round 1
#44 a. C-piece=Entire Vanilla, b. Carlos cuts C-piece into half, and Boris further cuts into half
C. (one-fourth of vanilla) for Boris
d. Dale prefers Strawberry three times as much as vanilla. V=(1/3)S only ¾-th of V is left so left over vanilla V’=3/4*V=1/4*S. The S=4/5-th of left over. Dale will cut Strawberry of angle x so that (x/180)*(4/5)=1/3 => x=75 deg. D. Dale keeps his piece.

28. Fair Division
The Last-Diminisher Method
Round 2. The R- piece becomes the new S and a new version of the game is played with the new S and the N remaining players. At the end of this round, the last diminisher gets to keep the current C-piece and is out of the game.

29. The Last-Diminisher Method (Round 2)

30. The Last-Diminisher Method
Round 3, 4, etc. Repeat the process, each time with one fewer player and a smaller S, until there are just two players left. At this point, divide the remaining piece between the final two players using the divider-chooser method.

31. Fair Division
The Last-Diminisher Method- Round 3

32. Fair Division
The Last-Diminisher Method- Round 3 continued

33. Fair Division
The Last-Diminisher Method- (divider-chooser method)

34. Fair Division
The Last-Diminisher Method- The Final Division

35. The Method of Sealed Bids
Fair Division
The Method of Sealed Bids

36. The Method of Sealed Bids
Step 1 (Bidding). Each of the players makes a bid (in dollars) for each of the items in the estate, giving his or her honest assessment of the actual value of each item. Each player submits their own bid in a sealed envelope.
Step 2 (Allocation). Each item will go to the highest bidder for that item. (If there is a tie, the tie can be broken with a coin flip.)
Step 3 (First Settlement). Depending on what items (if any) a player gets in Step 2, he or she will owe money to or be owed money by the estate. To determine how much a player owes or is owed, we first calculate each player’s fair-dollar share of the estate.

37. The Method of Sealed Bids
Step 4 (Division of the Surplus). The surplus is common money that belongs to the estate, and thus to be divided equally among the players.
Step 5 (Final Settlement). The final settlement is obtained by adding the surplus money to the first settlement obtained in Step 3.

38. Example 1
Three sisters Maura, Nessa, and Odelia will share a house and a cottage.
Apply the method of sealed bids to divide the property, using the bids shown below.
Solution: Each piece of property goes to the highest bidder.
Odelia gets the family home and places $301,000 into the compensation fund.
Nessa gets the cottage and places $203,000 into the compensation fund.
Solution, cont’d: The compensation fund now contains a total of $203,000 + $301,000 = $504,000.
Solution, cont’d: Each sister receives 1/3 of her total bids from the compensation fund.
Maura receives
Nessa receives
Odelia receives
Solution, cont’d: After the distributions, there is $504,000 – ($159,000 + $160,000 + $161,000) = $21,000 left in the fund.
The leftover money is distributed equally to the three sisters in the amount of $7000 each.
Solution, cont’d: The final shares are:
Maura receives $166,000 and no property.
Nessa receives the cottage, for which she paid a net amount of $33,000.
Odelia receives the family home, for which she paid a net amount of $133,000.

39. Example 1, cont’d
Solution, cont’d: Note that the division is proportional because each sister receives what she considers to be a fair share.

40. Fair Division
The Method of Markers

41. Fair Division
The Method of Markers

42. Fair Division
The Method of Markers
Preliminaries. The items are arranged randomly into an array.

43. Fair Division
The Method of Markers
Step 1 (Bidding). Each player independently divides the array into N segments by placing markers along the array.

44. Fair Division
The Method of Sealed Bids
Step 2 (Allocations). Scan the array from left to right until the first first marker is located. The player owning that marker goes first, and gets the first segment in his bid. That players markers are removed, and we continue scanning left to right, looking for the first second marker.

45. Fair Division
The Method of Sealed Bids
Step 2 (Allocations continued). The player owning that marker goes second and gets the second segment in her bid. Continue this process, assigning to each player in turn one of the segments in her bid. The last player gets the last segment in her bid.

46. Fair Division
The Method of Sealed Bids- Step 2

47. Fair Division
The Method of Sealed Bids- Step 2

48. Fair Division
The Method of Sealed Bids- Step 2

49. Fair Division
The Method of Sealed Bids- Step 2

50. Fair Division
The Method of Sealed Bids
Step 3 (Dividing Leftovers). The leftover items can be divided among the players by some form of lottery, and, in the rare case that there are many more leftover items than players, the method of markers could be used again.

51. Fair Division
The Method of Sealed Bids- Step 3