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The Tobin Tax - A Game-Theoretical and an Experimental Approach

48 Pages Posted: 12 Oct 2006  

Johannes Kaiser

University of Bonn - Laboratory for Experimental Economics

Thorsten Chmura

University of Bonn - Faculty of Law & Economics; Nottingham University Business School

Thomas Pitz

University of Bonn

Date Written: July 19, 2007

Abstract

In the nineteen-seventies, James Tobin suggested the introduction of a transaction tax on the currency market to cope with exchange rate volatility. In spite of his proposal being discussed frequently and very controversial ever since by economists and policy makers, the so-called Tobin tax has never been imposed on any currency market. We investigate the consequences of the introduction of such a tax on an asset market model from a game-theoretic and an experimental point of view. Our main results include in respect to our model that contrary to the situation in game-theoretic equilibrium, the Tobin tax i) reduces trade volume, ii) reduces volatility, iii) increases market efficiency, and iv) decreases earnings inequality. These effects are likely to disappear if the tax rate is high.

Keywords: Tobin tax, behavioral finance, experiment

JEL Classification: C91, D44, E44, E58, F31, G15

Suggested Citation

Kaiser, Johannes and Chmura, Thorsten and Pitz, Thomas, The Tobin Tax - A Game-Theoretical and an Experimental Approach (July 19, 2007). Available at SSRN: https://ssrn.com/abstract=936924 or http://dx.doi.org/10.2139/ssrn.936924

Johannes Kaiser (Contact Author)

University of Bonn - Laboratory for Experimental Economics ( email )

Adenauerallee 24-42
Bonn, 53113
Germany
+49 228 73 7497 (Phone)
+49 228 73 5007 (Fax)

HOME PAGE: http://www.bonneconlab.uni-bonn.de

Thorsten Chmura

University of Bonn - Faculty of Law & Economics ( email )

Postfach 2220
D-53012 Bonn
Germany

Nottingham University Business School

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

Thomas Pitz

University of Bonn ( email )

BWL 1
Adenauerallee 24-42
Bonn, D-53012
Germany

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