Research in Economics (2000) 54, 133–152 doi:10.1006/reec.1999.0214 Available online at http://www.idealibrary.com on On Choquet prices in a GEI-model with intermediation costs MARC OLIVER BETTZ ¨ UGE†, THORSTEN HENS†¶, MARTA LAITENBERGER‡ AND THOMAS SIWIK§ †Institute for Empirical Research in Economics, Bl ¨ umlisalpstrasse 10, CH-8006 Z ¨ urich, Switzerland ‡University of Bonn, Germany §Universit ¨ at Bielefeld, Germany (Received 12 March 1998, accepted 28 July 1999) Summary This article analyses whether the representation of asset prices by Choquet integration can be justified from a general equilibrium point of view. We demonstrate that if transaction costs functionals are increasing in the volume of trade, positive homogeneous and satisfy an additivity condition, the equilibrium price functional typically does not satisfy all the Choquet properties. Whereas subadditivity and positive homogeneity can be shown to hold for the equilibrium price functional, this is generally not the case for monotonicity and additivity of prices for comonotone income streams.  2000 University of Venice J.E.L. Classification: G12, D43, D52 Keywords: Choquet pricing, transaction costs, general equilib- rium, incomplete markets. 1. Introduction Trade on financial markets is usually not frictionless and does incur transaction costs in the form of intermediation costs, leading to a larger domain of no-arbitrage asset prices as compared to the case without transaction costs. In standard finance models without transaction costs the no-arbitrage condition is equivalent to the existence of an equilibrium price measure on the state space. In this case the price of an asset is equal to its expected value with respect to this probability measure. This also implies ¶ E-mail: thens@iew.unizh.ch 1090–9443/00/020133 C 20 $35.00/0  2000 University of Venice