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A Proportional Approach to Bankruptcy Problems with a guaranteed minimum

  • Giménez-Gómez, José Manuel
  • Peris, Josep E.

In a distribution problem, and specfii cally in bankruptcy issues, the Proportional (P) and the Egalitarian (EA) divisions are two of the most popular ways to resolve the conflict. The Constrained Equal Awards rule (CEA) is introduced in bankruptcy literature to ensure that no agent receives more than her claim, a problem that can arise when using the egalitarian division. We propose an alternative modi cation, by using a convex combination of P and EA. The recursive application of this new rule finishes at the CEA rule. Our solution concept ensures a minimum amount to each agent, and distributes the remaining estate in a proportional way. Keywords: Bankruptcy problems, Proportional rule, Equal Awards, Convex combination of rules, Lorenz dominance. JEL classi fication: C71, D63, D71.

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Paper provided by Universitat Rovira i Virgili, Department of Economics in its series Working Papers with number 2072/182645.

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Date of creation: 2012
Date of revision:
Handle: RePEc:urv:wpaper:2072/182645
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  1. Carmen Herrero & Antonio Villar, 2002. "Sustainability in bankruptcy problems," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer, vol. 10(2), pages 261-273, December.
  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. Diego Dominguez & William Thomson, 2006. "A new solution to the problem of adjudicating conflicting claims," Economic Theory, Springer, vol. 28(2), pages 283-307, 06.
  4. 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.
  5. Moreno-Ternero, Juan D. & Villar, Antonio, 2004. "The Talmud rule and the securement of agents' awards," Mathematical Social Sciences, Elsevier, vol. 47(2), pages 245-257, March.
  6. Dagan, N. & Serrano, R. & Volij, O.C., 1994. "A Non-Cooperative View of Consistent Bankruptcy Rules," Discussion Paper 1994-11, Tilburg University, Center for Economic Research.
  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.
  8. Kristof Bosmans & Luc Lauwers, 2007. "Lorenz comparisons of nine rules for the adjudication of conflicting claims," Center for Economic Studies - Discussion papers ces0705, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
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