  This paper studies the equilibrium price of an asset that is traded in
continuous time between N agents who have heterogeneous beliefs about the state
process underlying the asset's payoff. We propose a tractable model where
agents maximize expected returns under quadratic costs on inventories and
trading rates. The unique equilibrium price is characterized by a weakly
coupled system of linear parabolic equations which shows that holding and
liquidity costs play dual roles. We derive the leading-order asymptotics for
small transaction and holding costs which give further insight into the
equilibrium and the consequences of illiquidity.
