Implications of financial transaction costs on the real economy: A note
Research output: Journal contributions › Journal articles › Research › peer-review
Authors
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.
Original language | English |
---|---|
Journal | Contemporary Economics |
Volume | 8 |
Issue number | 1 |
Pages (from-to) | 113-118 |
Number of pages | 6 |
ISSN | 2084-0845 |
DOIs | |
Publication status | Published - 31.03.2014 |
Externally published | Yes |
- Economics, empirical/statistics - price risk, Hedging, transaction cost, financial transaction tax, duopoly