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Existence of financial market equilibria with transaction costs

Authors
Journal
Ricerche Economiche
0035-5054
Publisher
Elsevier
Publication Date
Volume
50
Issue
1
Identifiers
DOI: 10.1006/reco.1996.0004
Keywords
  • Incomplete Markets
  • Transaction Costs
  • Existence Of Equilibria
Disciplines
  • Mathematics

Abstract

Abstract The purpose of this paper is to give an existence proof of equilibria in a two-period exchange economy with incomplete markets and transaction costs. When tradings on financial markets incur real transaction costs —interpreted as costs of enforcement of financial contracts or real taxation of financial revenues —the set of individual portfolios is bounded by the limited resources of the economy. Existence of equilibria then follows from Kakutani 's fixed point theorem.

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