We consider the efficiency properties of exchange economies where privately informed traders behave strategically. Specifically, a competitive mechanism is any mapping of traders’ reports about their types to an equilibrium price vector and allocation of the reported economy. In our model,...

This paper investigates the effects of transaction taxes on depth and bid-ask spread under asymmetric information. The paper uses a static model where a monopolistic market maker faces liquidity and informed traders. Introducing transaction taxes could, surprisingly, lead to increase in depth....

The endowment effect, status quo bias, and loss aversion are robust and well documented results from experimental psychology. They introduce a wedge between the prices at which one is willing to sell or buy a good. The objective of this paper is to address this wedge. We show that the presence...