Merging-splitting-proofness in financial systems: A characterization result
Article -
Calleja, P., Llerena, F. (2026): "Merging-splitting-proofness in financial systems: A characterization result", Games and Economic Behavior, 155, 212-227.
In this paper, we explore the issue of manipulability in the setting of financial systems by considering two weak forms of immunity: merging-proofness and splitting-proofness. Not surprisingly, splitting-proofness conflicts with basic requirements such as the priority of debt over equity and the limited liability of equity. Remarkably, we provide a comprehensive characterization of the class of bankruptcy rules that gives rise to financial rules that satisfy merging-proofness.
Related elements
Share
Francesc Llerena