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Relations among the central rules in bankruptcy problems: A strategic perspective

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  • Tsay, Min-Hung
  • Yeh, Chun-Hsien

Abstract

We consider the “bankruptcy problem”, in which the liquidation value of a bankrupt firm has to be allocated among its creditors. By applying the Nash program to justify a bilaterally consistent rule, bilateral negotiations are traditionally resolved by applying the rule (Dagan et al., 1997; Chang and Hu, 2008). We introduce games in which bilateral negotiations are resolved by non-cooperative bargaining procedures and show that these games strategically justify the constrained equal awards rule, the constrained equal losses rule, the proportional rule, and the Talmud rule. By focusing on the differences in the non-cooperative bargaining procedures that capture the spirit of the rules, our results unveil novel connections among them.

Suggested Citation

  • Tsay, Min-Hung & Yeh, Chun-Hsien, 2019. "Relations among the central rules in bankruptcy problems: A strategic perspective," Games and Economic Behavior, Elsevier, vol. 113(C), pages 515-532.
    • Handle: RePEc:eee:gamebe:v:113:y:2019:i:c:p:515-532
    DOI: 10.1016/j.geb.2018.10.012
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    Cited by:

    1. Makoto Hagiwara & Shunsuke Hanato, 2021. "A strategic justification of the constrained equal awards rule through a procedurally fair multilateral bargaining game," Theory and Decision, Springer, vol. 90(2), pages 233-243, March.
    2. Schouten, Jop, 2022. "Cooperation, allocation and strategy in interactive decision-making," Other publications TiSEM d5d41448-8033-4f6b-8ec0-c, Tilburg University, School of Economics and Management.
    3. Roberto Serrano, 2020. "Sixty-Seven Years of the Nash Program: Time for Retirement?," Working Papers 2020-20, Brown University, Department of Economics.
    4. Emin Karagözoğlu & Kerim Keskin & Çağrı Sağlam, 2023. "(In)efficiency and equitability of equilibrium outcomes in a family of bargaining games," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(1), pages 175-193, March.
    5. Li, Jiawen & Ju, Yuan, 2023. "Divide and choose: An informationally robust strategic approach to bankruptcy problems," Journal of Mathematical Economics, Elsevier, vol. 107(C).
    6. Juan D. Moreno-Ternero & Min-Hung Tsay & Chun-Hsien Yeh, 2020. "A strategic justification of the Talmud rule based on lower and upper bounds," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(4), pages 1045-1057, December.
    7. Juan D. Moreno‐Ternero & Min‐Hung Tsay & Chun‐Hsien Yeh, 2022. "Strategic justifications of the TAL family of rules for bankruptcy problems," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(1), pages 92-102, March.
    8. Doudou Gong & Genjiu Xu & Xuanzhu Jin & Loyimee Gogoi, 2022. "A sequential partition method for non-cooperative games of bankruptcy problems," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 30(2), pages 359-379, July.
    9. Roberto Serrano, 2021. "Sixty-seven years of the Nash program: time for retirement?," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 12(1), pages 35-48, March.

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    More about this item

    Keywords

    Nash program; Bankruptcy problem; Bankruptcy rules; Strategic justification; Consistency;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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