Competitive Theories for Economies with General Transactions Technology

FRB of Philadelphia Working Paper No. 99-18

21 Pages Posted: 3 Apr 2000

See all articles by Satyajit Chatterjee

Satyajit Chatterjee

Federal Reserve Bank of Philadelphia

Philip Dean Corbae

University of Wisconsin - Madison - Department of Finance, Investment and Banking

Date Written: November 1999

Abstract

In this paper, the authors describe and compare two approaches to analyzing transactions costs in a general equilibrium setting. In the first approach, which the authors label the transactions costs approach, the commodity space is the same as that used in models without transactions costs. In the second approach, which we label the valuation equilibrium approach, the commodity space is chosen so that the exchange problem can be formulated as an instance of the abstract exchange model described in Debreu (1954). The authors argue that the valuation equilibrium approach provides a tractable framework for quantitative studies of the effects of transactions costs on economy-wide resource allocation.

JEL Classification: D23, D58

Suggested Citation

Chatterjee, Satyajit and Corbae, Philip Dean, Competitive Theories for Economies with General Transactions Technology (November 1999). FRB of Philadelphia Working Paper No. 99-18. Available at SSRN: https://ssrn.com/abstract=202712 or http://dx.doi.org/10.2139/ssrn.202712

Satyajit Chatterjee (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

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Philip Dean Corbae

University of Wisconsin - Madison - Department of Finance, Investment and Banking ( email )

975 University Avenue
Madison, WI 53706
United States
512-471-3211 (Phone)
512-471-3510 (Fax)

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