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Merging-splitting-proofness in financial systems: A characterization result

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  • Calleja, Pedro
  • Llerena, Francesc

Abstract

In this paper, we explore the issue of manipulability in the setting of financial systems by considering two weak forms of immunity: merging-proofness and splitting-proofness. Not surprisingly, splitting-proofness conflicts with basic requirements such as the priority of debt over equity and the limited liability of equity. Remarkably, we provide a comprehensive characterization of the class of bankruptcy rules that gives rise to financial rules that satisfy merging-proofness.

Suggested Citation

  • Calleja, Pedro & Llerena, Francesc, 2026. "Merging-splitting-proofness in financial systems: A characterization result," Games and Economic Behavior, Elsevier, vol. 155(C), pages 212-227.
    • Handle: RePEc:eee:gamebe:v:155:y:2026:i:c:p:212-227
    DOI: 10.1016/j.geb.2025.10.011
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    References listed on IDEAS

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    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games

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