Title

Default and Bankruptcy in a Multistage Exchange Economy

Authors

Martin Shubik

Document Type

Discussion Paper

Publication Date

12-1-1990

CFDP Number

963

CFDP Pages

14

Abstract

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.

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