Brokerage Commission Schedules

Michael Brennan and Tarun Chordia

Journal of Finance, 1993, vol. 48, issue 4, 1379-1402

Abstract: It is generally optimal for risk-sharing reasons to base a charge for information on the signal realization. When this is not possible, a charge based on the amount of trading, a brokerage commission, may be a good alternative. The optimal brokerage commission schedule is derived for a risk-neutral information seller faced with risk-averse purchasers who may differ in their risk aversion. Revenues from the brokerage commission are compared with those from a fixed charge for information and the optimal mutual fund management fee. Copyright 1993 by American Finance Association.

Date: 1993
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