Why people reach intermediate agreements? Axiomatic and strategic justifications

Abstract

As Roemer (1986) points out, things become more interesting once we include information. In this paper, following the line started by Jiménez-Gómez and Marco-Gil (2008), we define both a lower and an upper bounds on awards in the framework of the Lorenz-Bifocal Bankruptcy Problem (Gadea et al. (2010)), which is an extended bankruptcy problem enriched with a Commonly Accepted Equity Principles set and the idea of treat everybody as evenly as possible (Dutta and Ray (1989) and Arin (2007), among others). Moreover, we contribute with the definition of the Lorenz Double Boundedness Recursive procedure, which consists on the recursive imposition of both bounds, providing a natural way of justifying the convex combination of bankruptcy rules. Specifically, we retrieve the midpoint of extreme and opposite well known ways of distributing the resource. Finally, we complete our analysis from the strategic viewpoint, obtaining similar results.bankruptcy problems, lower bound, upper bound, duality, recursivity