Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/251438 
Year of Publication: 
2022
Series/Report no.: 
Working Paper No. 405
Publisher: 
University of Zurich, Department of Economics, Zurich
Abstract: 
Fees are omnipresent in markets but, with few exceptions, are omitted in economic models-such as Double Auctions-of these markets. Allowing for general fee structures, we show that their impact on incentives and efficiency in large Double Auctions hinges on whether the fees are homogeneous (as, e.g., fixed fees and price fees) or heterogeneous (as, e.g., bid-ask spread fees). Double Auctions with homogeneous fees share the key advantages of Double Auctions without fees: markets with homogeneous fees are asymptotically strategyproof and efficient. We further show that these advantages are preserved even if traders have misspecified beliefs. In contrast, heterogeneous fees lead to complex strategic behavior (price guessing) and may result in severe market failures. Allowing for aggregate uncertainty, we extend these insights to market organizations other than the Double Auction.
Subjects: 
Double auction
fees
transaction costs
incentives
strategyproofness
efficiency
robustness
JEL: 
C72
D44
D47
D81
D82
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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