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tog comments on What level of compassion do you consider normal, expected, mandatory etc. ? - Less Wrong Discussion
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This is a good solution when marginal money has roughly equal utility to Alice and Bob, but suffers otherwise.
<nitpick>The misophonic neighbour in the OP is unnamed; Bob is Alice's friend acting as a kind of sort of mediator.</nitpick>
Similar situations were discussed here:
http://lesswrong.com/lw/jje/decision_auctions_aka_how_to_fairly_assign_chores/afc5