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An Experiment On Bankruptcy

Author

Listed:
  • Juan de Dios Moreno Ternero

    (Yale University)

  • Carmen Herrero Blanco

    (Instituto Valenciano de Investigaciones Económicas)

  • Giovanni Ponti

    (Universidad de Alicante)

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.

Suggested Citation

  • Juan de Dios Moreno Ternero & Carmen Herrero Blanco & Giovanni Ponti, 2003. "An Experiment On Bankruptcy," Working Papers. Serie AD 2003-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2003-03
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2003-03.pdf
    File Function: Fisrt version / Primera version, 2003
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    References listed on IDEAS

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    Cited by:

    1. Carmen Herrero & Juan Moreno-Ternero & Giovanni Ponti, 2010. "On the adjudication of conflicting claims: an experimental study," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 34(1), pages 145-179, January.
    2. 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.
    3. Daniela Di Cagno & Marco Spallone, 2012. "An experimental investigation on optimal bankruptcy laws," European Journal of Law and Economics, Springer, vol. 33(1), pages 205-229, February.
    4. Ignacio García-Jurado & Julio González-Díaz & Antonio Villar, 2006. "A Non-cooperative Approach to Bankruptcy Problems," Spanish Economic Review, Springer;Spanish Economic Association, vol. 8(3), pages 189-197, September.

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