A noncooperative approach to bankruptcy problems with an endogenous estate

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dc.citation.epage318en_US
dc.citation.issueNumber1en_US
dc.citation.spage299en_US
dc.citation.volumeNumber217en_US
dc.contributor.authorKaragözoǧlu, E.en_US
dc.date.accessioned2016-02-08T11:02:57Z
dc.date.available2016-02-08T11:02:57Z
dc.date.issued2014en_US
dc.departmentDepartment of Economicsen_US
dc.description.abstractWe introduce a new class of bankruptcy problems in which the value of the estate is endogenous and depends on agents' investment decisions. There are two investment alternatives: investing in a company (risky asset) and depositing money into a savings account (risk-free asset). Bankruptcy is possible only for the risky asset. We define a game between agents each of which aims to maximize his expected payoff by choosing an investment alternative and a company management which aims to maximize profits by choosing a bankruptcy rule. Our agents are differentiated by their incomes. We consider three most prominent bankruptcy rules in our base model: the proportional rule, the constrained equal awards rule and the constrained equal losses rule. We show that only the proportional rule is a part of any pure strategy subgame perfect Nash equilibrium. This result is robust to changes in income distribution in the economy and can be extended to a larger set of bankruptcy rules and multiple types. However, extension to multiple company framework with competition leads to equilibria where the noncooperative support for the proportional rule disappears.en_US
dc.description.provenanceMade available in DSpace on 2016-02-08T11:02:57Z (GMT). No. of bitstreams: 1 bilkent-research-paper.pdf: 70227 bytes, checksum: 26e812c6f5156f83f0e77b261a471b5a (MD5) Previous issue date: 2014en
dc.identifier.doi10.1007/s10479-014-1588-4en_US
dc.identifier.eissn1572-9338
dc.identifier.issn0254-5330
dc.identifier.urihttp://hdl.handle.net/11693/26653
dc.language.isoEnglishen_US
dc.publisherSpringeren_US
dc.relation.isversionofhttp://dx.doi.org/10.1007/s10479-014-1588-4en_US
dc.source.titleAnnals of Operations Researchen_US
dc.subjectBankruptcy problemsen_US
dc.subjectConstrained equal awards ruleen_US
dc.subjectConstrained equal losses ruleen_US
dc.subjectNoncooperative gamesen_US
dc.subjectProportional ruleen_US
dc.titleA noncooperative approach to bankruptcy problems with an endogenous estateen_US
dc.typeArticleen_US

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