Inheritance Settlement Procedures and Incentives for Misrepresentation
The article considers the settlement of an estate consisting of an indivisible object that has to be divided among several heirs. Allocating the object to the one who values it most requires to ask the heirs for the cash amount which would render them indifferent between owner- and non-ownership of the whole object. The problem in doing so is that there is no guarantee that the heirs quote their actual cash equivalents. The paper examines the conditions for three different settlement schemes to be incentive compatible at least. In case of two heirs agreeing on the absence of systematic biases in valuation and mutual conjectures regarding valuation a settlement scheme which may best be described by the property of fair division is found to be truth inducing.
KeywordsReservation Price Incentive Compatibility Price Auction Potential Buyer Fair Division
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