The bankruptcy problem is concerned with how to divide the net worth of a bankrupt firm among its creditors. Aumann and Maschler(1985) argue that the Talmud rule is based on the equal-gain principle until mid-point (when the total amount to divide is ...
The bankruptcy problem is concerned with how to divide the net worth of a bankrupt firm among its creditors. Aumann and Maschler(1985) argue that the Talmud rule is based on the equal-gain principle until mid-point (when the total amount to divide is less than or equal to half of the sum of claims) and the equal-loss principle afterwards. Moreover, it coincides with the nucleolus of the corresponding transferable utility coalitional form game. In this paper, we propose a new rule based on the equal-loss principle until midpoint and the equla-gain principle afterwards. As it turns out, for 2- and 3-person bankruptcy problems, this rule coincides with the random arrival rule, which coincides with the Shapley value of the corresponding transferable utility coalitional form game. However, this relation does not hold for more than 3-person problems.