We study the effect of trading costs on information aggregation and acquisition in financial markets. For a given precision of investors' private information, an irrelevance result emerges when investors are ex-ante identical: price informativeness is independent of the level of trading costs....

A general equilibrium model of an economy is presented where people hold money rather than bonds in order to economize on transaction costs. In any such model it is not optimal for individuals to instantaneously adjust their money holdings when new information arrives. The (endogenous) delayed...

The expansion of markets and industrialization greatly increased the benefits of specialization in the U.S. economy. However, since the benefits of specialization can only be realized through trade, specialization significantly increases the volume of market transactions in the economy. The...

The paper emphasizes initially the effects of moving transaction costs on the potential effect of government rent subsidy programs. As a concomitant to this analysis, the paper reaffirms the low income elasticities of housing expenditure among low-income renters found by others. Moving...

General medical care in the United States has historically been provided by physicians who care for their patients in both ambulatory and hospital settings. Care is now increasingly divided between physicians specializing in hospital care (hospitalists) and ambulatory-based care primary care...

The empirical evidence on rational inattention lags far behind the theoretical developments: micro evidence on the most immediate consequence of observation costs − the infrequent observation of state variables − is not available in standard datasets. We contribute to filling the gap with...

We examine how liquidity and asset prices are affected by the following market imperfections: asymmetric information, participation costs, transaction costs, leverage constraints, non-competitive behavior and search. Our model has three periods: agents are identical in the first, become...

We derive a closed-form optimal dynamic portfolio policy when trading is costly and security returns are predictable by signals with different mean-reversion speeds. The optimal strategy is characterized by two principles: 1) aim in front of the target and 2) trade partially towards the current...

Recurrent intervals of inattention to the stock market are optimal if consumers incur a utility cost to observe asset values. When consumers observe the value of their wealth, they decide whether to transfer funds between a transactions account from which consumption must be financed and an...