This thesis includes three essays on the interaction between financial market institutions and market liquidity, and its implications for financial stability. The first essay studies an overlapping generations model of a risky asset market in which some agents face a participation cost. Market...

Chapter 1 develops a non-parametric methodology for identifying contract optimality in the presence of moral hazard. Following the first order approach, a standard method of computing optimal contracts, the paper first proves two theoretical properties of the solutions to the moral hazard...