Bankruptcy Problems with Reference-Dependent Preferences
Andrea Gallice ()
No 555, Carlo Alberto Notebooks from Collegio Carlo Alberto
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: D63 D03 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-upt
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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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