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A Noncooperative view of consistent bankruptcy rules

Nir Dagan, Roberto Serrano, and Oscar Volij

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Abstract

We introduce a game form that captures a noncooperative dimension of the consistency property of bankruptcy rules. Any consistent and monotonic rule is fully characterized by a bilateral principle and consistency. Like the consistency axiom, our game form, together with the bilateral principle, yields the corresponding consistent bankruptcy rule as a result of a unique outcome of Nash equilibria. The result holds for a large class of consistent monotone rules, including the Constrained Equal Award, the Proportional Rule, and many other well known rules. Moreover, all the subgame perfect equilibria are coalition-proof in the associated game in strategic form.

JEL: C72 and D63.

Games and Economic Behavior 18:55-72 (1997)

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