Coalitions, the Me-First Rule, and the Liquidation Decision

James S. Ang and Jess H. Chua

Bell Journal of Economics, 1980, vol. 11, issue 1, 355-359

Abstract: Conventional wisdom in economics recommends that a bankrupt firm with liquidation value greater than going-concern value be liquidated by the creditors and that a firm with going-concern value greater than liquidation value continue to operate. Recently, counterexamples to the traditional rule have been presented. This note argues that violation of the me-first rule is responsible for these counterexamples. Since violation of the me-first rule involves the absence of value-maximization on the part of some economic agents, economic theories concerned with rational behavior may justifiably still assume that the liquidation decision follows the traditional rule.

Date: 1980
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