A New Approach for Bounding Awards in Bankruptcy Problems

Abstract

The solution for the Contested Garment Problem proposed in the Babylonic Talmud, one of the most important sources of inspiration for solving situations where demand overcomes supply of some resources, suggests that each agent should receive at least some part of the available amount when facing these situations. This idea has underlied the theoretical analysis of bankruptcy problems from its beginning (O Neill, 1982) to present day (Dominguez and Thomson, 2006). In this context, starting from the fact that a society establishes its own set of Commonly Accepted Equity Principles , we propose a new lower bound on awards de ned, for each agent, as the minimum amount she gets according to all the admissible rules for such a society. Moreover, we analyze the recursive application of this new bound, since it will not exhaust the resources, in general.