Double Auctions and Transaction Costs

Simon Jantschgi, Heinrich H.Nax, Bary Pradelski and Marek Pycia

No 17039, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Transaction costs are ubiquitous in markets. We show that they can fundamentally alter incentives and welfare. We categorize transaction costs into two types. Uniform transaction costs—such as fixed and price fees—incur unavoidable dead-weight loss but preserve key asymptotic properties of markets without transaction cost. Discriminatory transaction costs—such as spread fees—can avoid dead-weight loss but asymptotically lead to complex strategic behavior that may result in market failure. We show how optimal design depends on market size and traders’ beliefs: uniform fees are often optimal in large markets, while discriminatory fees may be preferable in small markets.

Date: 2022-05
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP17039 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:17039

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP17039

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().