Modeling the Competition between Public Debt Creditors in Iran: An Application of Bankruptcy Games

The Government in Iran plays a substantial role in the economy through financial interactions extended to various fields and many organizations. In recent years, investigation of such economic interactions indicates a considerable government debt for ۲۰۱۶, estimated at around ۴۵% of GDP or two times of public budget. Given that Iran experiences tough sanctions and its oil export is restricted, many studies and experts assert that the government's income will decrease and its debt will increase even further. For creditors, this means that they are likely to face difficulties to get their money back and must compete with each other for that. The fierce competition among the government's creditors is quite understandable. The budget dedicated to paying off debts to private and public entities is only a tiny fraction of their demands. This paper tries to model the creditors' preferences using different asset allocation methods in bankruptcy games and finds a solution that may be consented. Results show that the Shapley Value dividing rule has the highest chance to be selected as social selection. Using this method, of the ۴۵۰ thousand billion Rials in the public budget allocated to pay off public institutions and organizations (including private banks), the Social Security Organization (SSO) and government banks receive ۱۳۷ thousand billion Rials (۱۶.۱% and ۲۴.۲% of their demands, respectively), private banks and credit institutions receive ۱۲۷ thousand billion Rials (۳۱%), public contractors receive ۳۵ thousand billion Rials (۲۶.۳%). Other public entities receive ۱۳ thousand billion Rials (۲۸.۳%) for their demands.

Keywords:

Bankruptcy Games , Public Debts , Social Choice