AN EXPERIMENT ON BANKRUPTCY

Juan de Dios Moreno Ternero (), Carmen Herrero () and Giovanni Ponti ()
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Juan de Dios Moreno Ternero: Yale University
Authors registered in the RePEc Author Service: Juan D. Moreno-Ternero

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: This paper reports an experimental study on three well known solutions for bankruptcy problems, that is, the constrained equal-awards, the proportional and the constrained equal-losses rule. To do this, we first let subjects play three games designed such that the unique equilibrium outcome coincides with one of these three rules. Moreover, we also let subjects play an additional game, that has the property that all (and only) strategy profiles in which players unanimously agree on the same rule constitute a strict Nash equilibrium. While in the first three games subjects' play easily converges to the unique equilibrium rule, in the last game the proportional rule overwhelmingly prevails as a coordination device.

Pages: 34 pages
Date: 2003-02
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Citations: View citations in EconPapers (7)

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