Equalizing solutions for bankruptcy problems revisited

Abstract

When solving bankruptcy problems through equalizing solutions, agents with small claims prefer to distribute the estate according to the Constrained Equal Awards solution, while the adoption of the Constrained Equal Losses solution is preferred by agents with high claims. Therefore, the determination of which is the central claimant, as a reference to distinguish the agents with a high claim from those with a low claim, is a relevant question when designing hybrid solutions, or new methods to distribute the available estate in a bankruptcy problem. We explore the relationship between the equal awards parameter λ and the equal losses parameter μ that characterize the two solutions. We show that the central claimant is fully determined by these parameters. In addition, we explore how to compute these parameters and present optimization problems that provide the Constrained Equal Awards and the Constrained Equal Losses solutions.