Constrained Egalitarianism: A New Solution for Claims Problems

Youngsub Chun ; James Schummer ; William Thomson

Professor, School of Economics, Seoul National University, Seoul 151-742, Korea, Tel: +82-2-880-6382 ychun@plaza.snu.ac.kr
Professor, MEDS, Kellogg School of Management, Northwestern University, Evanston, IL 60208-2009, USA, Tel: +1-847-491-5151 schummer@nwu.edu
Professor, Department of Economics, University of Rochester, NY 14627, USA, Tel: +1-716-275-2236 WTH2@troi.cc.rochester.edu

JEL Classification: D63, D7O

Abstract

We propose a new rule to solve claims problems (O'Neill 1982) and show that this rule is best in achieving certain objectives of equality. We present three theorems describing it as the most “egalitarian” among all rules satisfying two minor requirements, “estate-monotonicity” and “the midpoint property.” We refer to it as the “constrained egalitarian” rule. We show that it is consistent and give a parametric representation of it. We also define several other rules and relate all of them to the rules that have been most commonly discussed in the literature.

Keywords:

Claims problems, Constrained egalitarian rule, Talmud rule, Consistency

Acknowledgments

We thank Robert Aumann, Bettina Klaus, and Sang-Young Sonn for their comments. Youngsub Chun gratefully acknowledges financial support from the LG Yonam Foundation and William Thomson from NSF under grant SBR-9731431. This is a much revised version of a note by the first and last authors entitled “A consistent solution for claims problems,” September 1990.

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