Bankruptcy Problems with Reference-Dependent Preferences

Andrea Gallice

No 555, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: I study bankruptcy problems under the assumption that claimants have referencedependent preferences. I consider different specifications for claimants’ reference points and show how perceived gains and losses impact on aggregate welfare. I can thus rank the four most prominent rules (Proportional, Constrained Equal Awards, Constrained Equal Losses, and Talmud) on the basis of the level of utilitarian and maxmin welfare that they generate. When none of these rules maximizes welfare, I identify the rule that does it and discuss its properties.

Keywords: bankruptcy problems; reference-dependent preferences; reference points; utilitarian welfare; maxmin welfare. (search for similar items in EconPapers)
JEL-codes: D03 D63 (search for similar items in EconPapers)
Pages: pages 41
Date: 2018
New Economics Papers: this item is included in nep-upt
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Related works:
Journal Article: Bankruptcy problems with reference-dependent preferences (2019)
Working Paper: Bankruptcy Problems with Reference-Dependent Preferences (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:555

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