Economic Theory

, Volume 45, Issue 1, pp 65-97

First online:

Financial markets with endogenous transaction costs

  • V. Filipe Martins-da-RochaAffiliated withGraduate School of Economics, Getulio Vargas Foundation Email author 
  • , Yiannis VailakisAffiliated withDepartment of Economics, University of Exeter Business School

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The paper proposes an alternative general equilibrium formulation of financial asset economies with transaction costs. Transaction costs emerge endogenously at equilibrium and reflect agents’ decisions of intermediating financial activities at the expense of providing labor services.


Competitive equilibrium Incomplete markets Endogenous transaction costs

JEL Classification

D23 D41 D52