Creator: Marimon, Ramon, 1953- and Wallace, Neil. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 288 Abstract:
The consequences of costly divisibility of assets are studied using a model with the following features. The demand for assets is generated from an overlapping generations model with a continuum of agents in each generation and with intra-generation trade (intermediation) ruled out. There is a once-for-all supply of a stock of nonnegative-dividend assets in a large size, and there is a costly technology for dividing them into smaller sizes. Stationary equilibria are shown to exist. In contrast with similar models with costless divisibility of assets, competitive equilibria are not necessarily desirable; there can be Pareto-ordered equilibria.
Keyword: Trade, Asset, and Depreciation Subject (JEL): D50 - General equilibrium and disequilibrium - General