Fair Division of Goods in the Shadow of Market Values

TL;DR

This paper proposes a new method for dividing divisible goods that considers both market values and individual preferences, allowing for more acceptable and flexible allocations in legal and financial contexts.

Contribution

It introduces a procedure combining market values and preferences, relaxing strict monetary equality to improve fairness and acceptability in division outcomes.

Findings

The method effectively balances market values and preferences.

Dropping strict monetary equality leads to more acceptable solutions.

Robustness analysis highlights the impact of model misspecification.

Abstract

Inheritances, divorces or liquidations of companies require common assets to be divided among the entitled parties. Legal methods usually consider the market value of goods, while fair division theory takes into account the parties' preferences expressed as utilities. I combine the two practices to define a procedure that optimally allocates divisible goods with market values to people with easily elicited preferences. Imposing exact equality in the bundles' monetary values may produce unacceptable solutions. I drop the tight requirement and suggest a procedure in which the differences in the monetary values are explained in terms of satisfaction per monetary share as perceived by the agents. A robustness study shows the consequences of misspecification in the model parameters.