Technology, Transactions Costs, and Investor Welfare: Is a Motley Fool Born Every Minute?
Washington University Law Quarterly Symposium on Electronic Technology and Securities Regulation, Vol. 75, No. 2, 1997
Posted: 12 May 1997
There are 2 versions of this paper
Technology, Transactions Costs, and Investor Welfare: Is a Motley Fool Born Every Minute?
Abstract
Computer network technology promises to revolutionize the secondary securities market and particularly to reduce dramatically the marginal costs associated with trading corporate equities. Lowering the transactions costs usually is presumed to increase trader welfare. Certain unique characteristics of the secondary securities market suggest, however, that reducing the marginal costs associated with trading stocks may have the perverse ad counterintuitive effect of decreasing investor welfare. Policymakers should consider this possibility as they respond to the market's rapid evolution.
JEL Classification: G18, K22
Suggested Citation: Suggested Citation