Abstract
We compare certain bankruptcy rules in a bankruptcy model with an endogenous estate on the basis of normative criteria. In particular, …ve properties related to distributive concerns are analyzed: minimal rights …rst, securement of initial investments, initial investments …rst, reasonable lower bounds on awards, and reasonable lower bounds on losses. The proportional rule receives the strongest support from this normative analysis among the rules considered. We also observe that the performance of the proportional rule improves in the family of bankruptcy problems with endogenous estates compared to the general set of bankruptcy problems. Our results complement those in Karagozoglu (2008) and provide a broader perspective to bankruptcy problems with endogenous estates.
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