Bankruptcy Rules and Coalitional Manipulation

Abstract

In this paper, we study the immunity of bankruptcy rules to manipulation via merging or splitting agents' claims. We focus on the TAL-family of bankruptcy rules (Moreno-Ternero & Villar, 2006), a one-parameter family encompassing three classical rules: the Talmud (T) rule, the constrained equal-awards (A) rule and the constrained equal-losses (L) rule. We show that all rules within the TAL-family are partially non-manipulable and identify the domain of problems where each rule is either non-manipulable by merging or non-manipulable by splitting. We also show that they can be ranked in terms of their relative non-manipulability, according to the parameter that generates the family.

Keywords: Bankruptcy problems, TAL-family, manipulation by merging, manipulation

JEL Classification: D63