Priority and proportionality in bankruptcy

  • Karol Flores-SzwagrzakEmail author
  • Jaume García-Segarra
  • Miguel Ginés-Vilar
Original Paper


We study the problem of distributing the liquidation value of a bankrupt firm among its creditors (O’Neill, Math Soc Sci 2(4):345–371, 1982; Aumann and Maschler, J Econ Theory 36(2):195–213, 1985). Real-life distribution rules prioritize predetermined creditor groups, dividing the amount assigned to each group proportionally to claims. We provide the first axiomatic characterization of such rules. In addition to the classical consistency and continuity axioms, these rules are characterized by the following properties: (1) bankruptcy problems with the same claims and where each claimant’s award is positive in each problem can be solved either jointly or separately without altering the recommended awards, (2) a dual property specifying that bankruptcy problems with the same claims and where each claimant’s loss is positive can be solved either jointly or separately without altering the recommended awards.

JEL classification

D70 D63 D71 



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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Copenhagen Business SchoolFrederiksbergDenmark
  2. 2.University of CologneCologneGermany
  3. 3.University Jaume I of CastellónCastellón de la PlanaSpain

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