Implications of financial transaction costs on the real economy: A note
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...
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| Format: | Article |
| Language: | English |
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University of Finance and Management, Warsaw; Vistula University
2014-03-01
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| Series: | Contemporary Economics |
| Online Access: | http://ce.vizja.pl/en/download-pdf/id/337 |
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doaj-f449ff0dd37f4075939505b7cb0a41fe2020-11-25T00:40:17ZengUniversity of Finance and Management, Warsaw; Vistula UniversityContemporary Economics2084-08452014-03-0181111810.5709/ce.1897-9254.135337Implications of financial transaction costs on the real economy: A noteMatthias Pelster0-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.http://ce.vizja.pl/en/download-pdf/id/337 |
| collection |
DOAJ |
| language |
English |
| format |
Article |
| sources |
DOAJ |
| author |
Matthias Pelster |
| spellingShingle |
Matthias Pelster Implications of financial transaction costs on the real economy: A note Contemporary Economics |
| author_facet |
Matthias Pelster |
| author_sort |
Matthias Pelster |
| title |
Implications of financial transaction costs on the real economy: A note |
| title_short |
Implications of financial transaction costs on the real economy: A note |
| title_full |
Implications of financial transaction costs on the real economy: A note |
| title_fullStr |
Implications of financial transaction costs on the real economy: A note |
| title_full_unstemmed |
Implications of financial transaction costs on the real economy: A note |
| title_sort |
implications of financial transaction costs on the real economy: a note |
| publisher |
University of Finance and Management, Warsaw; Vistula University |
| series |
Contemporary Economics |
| issn |
2084-0845 |
| publishDate |
2014-03-01 |
| description |
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. |
| url |
http://ce.vizja.pl/en/download-pdf/id/337 |
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AT matthiaspelster implicationsoffinancialtransactioncostsontherealeconomyanote |
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1725291184841031680 |