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An Experiment On Bankruptcy

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Author Info
Juan de Dios Moreno Ternero () (Yale University)
Carmen Herrero Blanco (Instituto Valenciano de Investigaciones Económicas)
Giovanni Ponti (Universidad de Alicante)

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Abstract

This paper reports an experimental study on three well known solutions for bankruptcy problems, that is, the constrained equal-awards, the proportional and the constrained equal-losses rule. To do this, we first let subjects play three games designed such that the unique equilibrium outcome coincides with one of these three rules. Moreover, we also let subjects play an additional game, that has the property that all (and only) strategy profiles in which players unanimously agree on the same rule constitute a strict Nash equilibrium. While in the first three games subjects' play easily converges to the unique equilibrium rule, in the last game the proportional rule overwhelmingly prevails as a coordination device.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2003-03.pdf
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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2003-03.

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Length: 34 pages
Date of creation: Feb 2003
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2003-03

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  1. Binmore, Ken & Osborne, Martin J. & Rubinstein, Ariel, 1992. "Noncooperative models of bargaining," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 7, pages 179-225 Elsevier. [Downloadable!] (restricted)
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  2. O'Neill, Barry, 1982. "A problem of rights arbitration from the Talmud," Mathematical Social Sciences, Elsevier, vol. 2(4), pages 345-371, June. [Downloadable!] (restricted)
  3. Herrero, Carmen & Villar, Antonio, 2001. "The three musketeers: four classical solutions to bankruptcy problems," Mathematical Social Sciences, Elsevier, vol. 42(3), pages 307-328, November. [Downloadable!] (restricted)
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  4. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April. [Downloadable!] (restricted)
  5. Costa-Gomes, Miguel & Crawford, Vincent P & Broseta, Bruno, 2001. "Cognition and Behavior in Normal-Form Games: An Experimental Study," Econometrica, Econometric Society, vol. 69(5), pages 1193-1235, September.
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  6. Dagan, Nir & Volij, Oscar, 1993. "The bankruptcy problem: a cooperative bargaining approach," Mathematical Social Sciences, Elsevier, vol. 26(3), pages 287-297, November. [Downloadable!] (restricted)
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  7. 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. [Downloadable!] (restricted)
  8. Nir Dagan, 1996. "New Characterizations of Old Bankruptcy Rules," Economic theory and game theory 002, Nir Dagan. [Downloadable!]
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  9. Dagan, Nir & Serrano, Roberto & Volij, Oscar, 1997. "A Noncooperative View of Consistent Bankruptcy Rules," Games and Economic Behavior, Elsevier, vol. 18(1), pages 55-72, January. [Downloadable!] (restricted)
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  10. Xavier Cuadras-Morató & José-Luis Pinto-Prades & José-María Abellán-Perpiñán, 2001. "Equity considerations in health care: the relevance of claims," Health Economics, John Wiley & Sons, Ltd., vol. 10(3), pages 187-205. [Downloadable!]
  11. Chun, Youngsub, 1989. "A noncooperative justification for egalitarian surplus sharing," Mathematical Social Sciences, Elsevier, vol. 17(3), pages 245-261, June. [Downloadable!] (restricted)
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