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Equalizing solutions for bankruptcy problems revisited
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Equalizing solutions for bankruptcy problems revisited

Author

Listed:
  • José Alcalde

    (University of Alicante)

  • Josep E. Peris

    (University of Alicante)

Abstract

When solving bankruptcy problems through equalizing solutions, agents with small claims prefer to distribute the estate according to the Constrained Equal Awards solution, while the adoption of the Constrained Equal Losses solution is preferred by agents with high claims. Therefore, the determination of which is the central claimant, as a reference to distinguish the agents with a high claim from those with a low claim, is a relevant question when designing hybrid solutions, or new methods to distribute the available estate in a bankruptcy problem. We explore the relationship between the equal awards parameter $$\lambda $$ λらむだ and the equal losses parameter $$\mu $$ μみゅー that characterize the two solutions. We show that the central claimant is fully determined by these parameters. In addition, we explore how to compute these parameters and present optimization problems that provide the Constrained Equal Awards and the Constrained Equal Losses solutions.

Suggested Citation

  • José Alcalde & Josep E. Peris, 2022. "Equalizing solutions for bankruptcy problems revisited," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 45(2), pages 481-502, December.
    • Handle: RePEc:spr:decfin:v:45:y:2022:i:2:d:10.1007_s10203-022-00373-y
    DOI: 10.1007/s10203-022-00373-y
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    References listed on IDEAS

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    1. Schummer, James & Thomson, William, 1997. "Two derivations of the uniform rule and an application to bankruptcy," Economics Letters, Elsevier, vol. 55(3), pages 333-337, September.
    2. 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.
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    More about this item

    Keywords

    Bankruptcy problem; Constrained Equal Awards; Constrained equal losses; Relative degree of conflict;
    All these keywords.

    JEL classification:

    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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