[leelin]

A neat twist to the standard pro-rata division we see a lot in bankruptcies.

What I like best is this method penalizes the creditor for extending too much credit. Note that the ones who are hurt most by the divide-contested-amount method are the creditors who over-estimated the debtors assets, while the creditors lending smaller amounts get a small bonus over pro-rata.

Edit: I think the (estate_size == 150) case sucks for the 200 and 300 creditors, though, because they correctly believed the estate would be worth more than 100. It is "pairwise-consistent" as the article defines it.

[DannoHung]

What about the situations where the 300 or 200 lender made the loans first though?

[tlholaday]

A lending contract can specify that all subsequent loans be subordinate, so the lender who lent first had the option of making such a specification.