Banking

A Coalitional Procedure Leading To A Family Of Bankruptcy Rules

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Executive Summary

The authors provide a general coalitional procedure that characterizes a family of rules for bankruptcy problems inspired by the Talmud. A bankruptcy problem refers to a situation in which one has to distribute, among a group of agents, a perfectly divisible commodity whose available amount is not enough to cover all agents' demands on it. This is a classic allocation problem, which encompasses many different situations like the bankruptcy of a firm, the division of an insufficient estate, or the collection of a given amount of taxes. Although instances of bankruptcy problems (and solutions for them) are already documented in ancient sources, such as the Talmud, Aristotle's books or Maimonides' essays, their formalization was not presented till the early eighties.

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