Charles and Monte must make a fair division of a cabin. They use the Knaster inheritance procedure. Charles bids $65,000 for the value of the cabin and Monte bids $57,000. What is the outcome of the fair division?
A) Charles gets the cabin and pays Monte $30,500.
B) Charles gets the cabin and pays Monte $4000.
C) Charles gets the cabin and pays Monte $57,000.
D) Charles gets the cabin and pays Monte $34,500.

Question

Quizplus · Accepted Answer

In the Knaster inheritance procedure, the person who bids the highest amount (Charles, in this case) gets the item. The difference between the two bids ($65,000 - $57,000 = $8,000) is divided equally between them. So, Charles pays Monte half of the difference, which is $4,000, plus half of Monte's bid, which is $28,500 ($57,000 / 2), totaling $32,500. However, the correct calculation for the fair division according to the Knaster procedure should involve Charles compensating Monte so that both feel they have been treated fairly, but the given options do not accurately reflect the Knaster procedure's outcome based on the standard approach. The closest option, given the misunderstanding in explanation, is A, where Charles gets the cabin and compensates Monte to balance the perceived value, but the exact numbers provided in the choices do not align with the typical Knaster procedure calculation.

Charles and Monte Must Make a Fair Division of a Cabin