A Positive Theory of Chapter 11
University of Chicago Law School, John M. Olin Law & Economics Working Paper No. 61
82 Pages Posted: 17 Nov 1998
Date Written: October 1998
This paper analyzes the voting rules of Chapter 11 using models from noncooperative game theory. Prior work has relied mainly on a model of bargaining between the debtor and a single creditor with perfect information. We expand on this work by considering two-party bargaining with imperfect information, and bargaining (with perfect and imperfect information) among a single debtor and multiple creditors. In addition, prior work has focused on explaining the role of the exclusivity period, the absolute priority rule, and the liquidation floor in Chapter 11 bargaining. We also consider the role of majoritarianism and supermajoritarianism, bicameralism, and classification, and the desirability of allowing creditors to purchase claims from each other.
JEL Classification: G33
Suggested Citation: Suggested Citation