Liability games

Peter Csoka, P. Jean-Jacques Herings*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

206 Downloads (Pure)


We analyze the question of how to distribute the asset value of an insolvent firm among its creditors and the firm itself. Compared to standard bankruptcy games as studied in the game-theoretic literature, we treat the firm as a player and define a new class of transferable utility games called liability games. We show that the core of a liability game is empty. We analyze the nucleolus of the game. The firm always gets a positive payment, at most equal to half of the asset value. Creditors with higher liabilities receive higher payments, but also suffer from higher deficiencies. We provide conditions under which the nucleolus coincides with a generalized proportional rule.
Original languageEnglish
Pages (from-to)260-268
Number of pages9
JournalGames and Economic Behavior
Publication statusPublished - Jul 2019


  • Liability problems
  • Insolvency
  • Deficiency
  • Bankruptcy games
  • Nucleolus
  • Proportional rule


Dive into the research topics of 'Liability games'. Together they form a unique fingerprint.

Cite this