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A proportional approach to bankruptcy. Problems with a guaranteed minimum

Author

Listed:
  • José M. Jiménez Gómez

    (Universidad Politécnica de Cartagena)

  • Josep Enric Peris Ferrando

    (Universidad de Alicante)

Abstract
In a distribution problem, and specifically in bankruptcy issues, the Proportional (P) and theEgalitarian (EA) divisions are two of the most popular ways to resolve the conflict. TheConstrained Equal Awards rule (CEA) is introduced in bankruptcy literature to ensure that noagent receives more than her claim, a problem that can arise when using the egalitarian division.We propose an alternative modification, by using a convex combination of P and EA. Therecursive application of this new rule finishes at the CEA rule. Our proposal ensures a minimumamount to each agent, and distributes the remaining estate in a proportional way.

Suggested Citation

  • José M. Jiménez Gómez & Josep Enric Peris Ferrando, 2012. "A proportional approach to bankruptcy. Problems with a guaranteed minimum," Working Papers. Serie AD 2012-11, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2012-11
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2012-11.pdf
    File Function: Fisrt version / Primera version, 2012
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    References listed on IDEAS

    as
    1. 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.
    2. Kristof Bosmans & Luc Lauwers, 2011. "Lorenz comparisons of nine rules for the adjudication of conflicting claims," International Journal of Game Theory, Springer;Game Theory Society, vol. 40(4), pages 791-807, November.
    3. H. Peyton Young, 1987. "On Dividing an Amount According to Individual Claims or Liabilities," Mathematics of Operations Research, INFORMS, vol. 12(3), pages 398-414, August.
    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. Diego Dominguez & William Thomson, 2006. "A new solution to the problem of adjudicating conflicting claims," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 28(2), pages 283-307, June.
    6. Sofia Grahn & Mark Voorneveld, 2002. "Population Monotonic Allocation Schemes in Bankruptcy Games," Annals of Operations Research, Springer, vol. 109(1), pages 317-329, January.
    7. 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.
    8. Carmen Herrero & Antonio Villar, 2002. "Sustainability in bankruptcy problems," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 10(2), pages 261-273, December.
    9. 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.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Thomson, William, 2015. "Axiomatic and game-theoretic analysis of bankruptcy and taxation problems: An update," Mathematical Social Sciences, Elsevier, vol. 74(C), pages 41-59.
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    3. Subiza, Begoña & Silva-Reus, José A. & Peris, Josep E., 2015. "Cost sharing solutions defined by non-negative eigenvectors," European Journal of Operational Research, Elsevier, vol. 244(2), pages 592-600.

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    More about this item

    Keywords

    Bankruptcy problems; Proportional rule; Equal Awards; Convex combination of rules; Lorenz dominance.;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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