Announcements

CANCELLED- ECONOMICS SEMINAR- Sinan Ertemel

Author: CASE
Time: 15:00
Location: CASE 127

CANCELLED

KOÇ UNIVERSITY
FACULTY OF ADMINISTRATIVE SCIENCES AND ECONOMICS
ECONOMICS SEMINAR

10 March  2020 –TUESDAY

CASE 127 -16:00

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Speaker  : Sinan Ertemel- Istanbul Technical University

Title       :  Parametric rules for state contingent claims

Time       : 16:00-17:30

Place      : CASE 127

Date       : 10 March 2020 -Tuesday

Abstract: We study bankruptcy rules in a setting where individuals have state contingent claims. A rule must distribute shares before uncertainty resolves. Within a wide class of parametric rules, we first characterize rules of ex–ante form in terms of the way that the rule processes inherent uncertainty in the individual claims. The key property is: No Penalty for Risk. It says that the rule does not penalize an individual in a situation that differs from another only in terms of the this individual’s claim in that the former situation has a risky version of the riskless claim in the latter situation. Whereas for the ex–post characterization, our key property is: Indifference to Independent Combinations. It says that if an individual is risk neutral with expected utility preferences then any rule that makes her indifferent between any bankruptcy problem and a corresponding independent combination of gamble between a degenerate gamble and a zero game (any bankruptcy game with zero endowment) forces the rule to be in the ex–post form. Finally, a partial comparative static result is provided which formalizes the claim that ex–ante rules are normatively more appealing for individuals when the level of the resource is low enough.