In this paper we discuss the effects of a Transaction Tax on an artificial market with varying liquidity where a large number of agents can trade a share of a risky asset. A market maker is in charge to optimally set the level of taxation in order to obtain a desired mixture of activity and volatility. We show that, depending on the liquidity of the market, two possible regimes of optimal taxation emerge: a non-negligible level of taxation for highly liquid markets and low (close to zero) levels of taxation for low liquidity markets. This outcome resembles the two-tier rate structure discussed by Spahn in his famous contributions Spahn (1995).

In this paper we discuss the effects of a Transaction Tax on an artificial market with varying liquidity where a large number of agents can trade a share of a risky asset. A market maker is in charge to optimally set the level of taxation in order to obtain a desired mixture of activity and volatility. We show that, depending on the liquidity of the market, two possible regimes of optimal taxation emerge: a non-negligible level of taxation for highly liquid markets and low (close to zero) levels of taxation for low liquidity markets. This outcome resembles the two-tier rate structure discussed by Spahn.

Optimality of a two-tier rate structure for a transaction tax in an artificial market

LIUZZI, DANILO;PELLIZZARI, Paolo;TOLOTTI, Marco
2017-01-01

Abstract

In this paper we discuss the effects of a Transaction Tax on an artificial market with varying liquidity where a large number of agents can trade a share of a risky asset. A market maker is in charge to optimally set the level of taxation in order to obtain a desired mixture of activity and volatility. We show that, depending on the liquidity of the market, two possible regimes of optimal taxation emerge: a non-negligible level of taxation for highly liquid markets and low (close to zero) levels of taxation for low liquidity markets. This outcome resembles the two-tier rate structure discussed by Spahn in his famous contributions Spahn (1995).
Highlights of Practical Applications of Cyber-Physical Multi-Agent Systems
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10278/3688803
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