Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105393
Authors: 
Pelster, Matthias
Year of Publication: 
2014
Citation: 
[Journal:] Contemporary Economics [ISSN:] 2084-0845 [Publisher:] Vizja Press & IT [Place:] Warsaw [Volume:] 8 [Year:] 2014 [Issue:] 1 [Pages:] 113-118
Abstract: 
This note studies the influence of a financial transaction tax and transaction costs on the optimal production and hedging strategies of a duopoly. Firms are exposed to demand uncertainty that leads to price risk and can hedge their risk exposure on a forward market. However, the forward position is subject to transaction costs. We investigate two settings: first, we explore the Cournot duopoly with a simultaneous hedging opportunity; second, we analyze the case with a sequential forward market. We show that in both settings transaction costs lead to a less competitive market and that prices increase as the producers limit their output.
Subjects: 
price risk
hedging
transaction cost
financial transaction tax
duopoly
JEL: 
D21
D43
F10
F11
Persistent Identifier of the first edition: 
Document Type: 
Article
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