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Default and Bankruptcy in a Multistage Exchange Economy

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Abstract

Either lending must be secured or otherwise some form of default or bankruptcy rules are required to provide a disincentive against strategic default. When many time periods are involved, the mere specification of a penalty which is sufficient for one period of trade, is not sufficient. The complete specification of even a two period game requires that both the treatment of creditors (including seniority conditions) and the nature of the rehabilitation of the debtor must be specified. This paper explores these problems.

Suggested Citation

  • Martin Shubik, 1990. "Default and Bankruptcy in a Multistage Exchange Economy," Cowles Foundation Discussion Papers 963, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:963
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    References listed on IDEAS

    as
    1. Pradeep Dubey & Siddhartha Sahi, 2016. "Optimal Prizes," Department of Economics Working Papers 16-03, Stony Brook University, Department of Economics.
    2. Pradeep Dubey & John Geanakoplos & Martin Shubik, 1988. "Default and Efficiency in a General Equilibrium Model with Incomplete Markets," Cowles Foundation Discussion Papers 879R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1989.
    3. Dubey, Pradeep & Shubik, Martin, 1979. "Bankruptcy and optimality in a closed trading mass economy modelled as a non-cooperative game," Journal of Mathematical Economics, Elsevier, vol. 6(2), pages 115-134, July.
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    Keywords

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    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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