Default and Bankruptcy in a Multistage Exchange Economy
Either lending must be secured or otherwise some form of default or bankruptcy rules are required to provide a disincentive against strategic default. When many time periods are involved, the mere speciﬁcation of a penalty which is suﬀicient for one period of trade, is not suﬀicient. The complete speciﬁcation of even a two period game requires that both the treatment of creditors (including seniority conditions) and the nature of the rehabilitation of the debtor must be speciﬁed. This paper explores these problems.
Shubik, Martin, "Default and Bankruptcy in a Multistage Exchange Economy" (1990). Cowles Foundation Discussion Papers. 1206.