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Updating Claims in Bankruptcy Problems

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  • M. Josune Albizuri
  • Justin Leroux

    ()
    (IEA, HEC Montréal)

  • José Manuel Zarzuelo

Abstract

We reexamine the consistency axiom in bankruptcy problems and propose arguments in favor of an alternative definition of a reduced problem. The classical definition updates the size of the estate while keeping agents' claims unaffected. Instead, we suggest updating agents' claims along with the estate. The resulting consistency axiom characterizes the well-known Random Arrival rule as the unique bilaterally consistent extension of the Contested Garment rule to many agents. We also establish that our definition of a reduced bankruptcy problem corresponds to the definition of a reduced TU game proposed in Hart & Mas-Colell (Econometrica, 1989).

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Bibliographic Info

Paper provided by HEC Montréal, Institut d'économie appliquée in its series Cahiers de recherche with number 08-08.

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Length: 14 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:iea:carech:0808

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Postal: Institut d'économie appliquée HEC Montréal 3000, Chemin de la Côte-Sainte-Catherine Montréal, Québec H3T 2A7
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  1. Sudholter, Peter, 1998. "Axiomatizations of Game Theoretical Solutions for One-Output Cost Sharing Problems," Games and Economic Behavior, Elsevier, vol. 24(1-2), pages 142-171, July.
  2. Hart, Sergiu & Mas-Colell, Andreu, 1989. "Potential, Value, and Consistency," Econometrica, Econometric Society, vol. 57(3), pages 589-614, May.
  3. Aumann, Robert J. & Maschler, Michael, 1985. "Game theoretic analysis of a bankruptcy problem from the Talmud," Journal of Economic Theory, Elsevier, vol. 36(2), pages 195-213, August.
  4. Thomson, W., 1996. "Consistent Allocation Rules," RCER Working Papers 418, University of Rochester - Center for Economic Research (RCER).
  5. Thomson, William, 2003. "Axiomatic and game-theoretic analysis of bankruptcy and taxation problems: a survey," Mathematical Social Sciences, Elsevier, vol. 45(3), pages 249-297, July.
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Cited by:
  1. Yan-an Hwang & Tsung-fu Wang, 2009. "Population monotonicity, consistency and the random arrival rule," Economics Bulletin, AccessEcon, vol. 29(4), pages 2816-2821.
  2. William Thomson, 2013. "Axiomatic and game-theoretic analysis of bankruptcy and taxation problems: an update," RCER Working Papers 578, University of Rochester - Center for Economic Research (RCER).

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