The effect of transaction costs on double auction markets

Charles Noussair, Stephane Robin, Bernard Ruffieux

Research output: Contribution to journalArticlepeer-review

13 Scopus citations

Abstract

The ability of the continuous double auction to attain the competitive equilibrium outcome is one of the most robust results in experimental economics. In this paper, we study the sensitivity of the behavior of the double auction to the imposition of a monetary cost on the submission of offers to buy and sell. We find that, even with the transaction cost, prices converge toward the competitive equilibrium level. However, the presence of the transaction cost leads to lower quantity exchanged and market efficiency than in the competitive equilibrium.

Original languageEnglish (US)
Pages (from-to)221-233
Number of pages13
JournalJournal of Economic Behavior and Organization
Volume36
Issue number2
DOIs
StatePublished - Aug 1 1998
Externally publishedYes

Keywords

  • C92
  • Double auction
  • Transaction cost

ASJC Scopus subject areas

  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management

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