Brokerage Commission Schedules

  • Author(s): MICHAEL J. BRENNAN, TARUN CHORDIA
  • Published: Apr 30, 2012
  • Pages: 1379-1402
  • DOI: 10.1111/j.1540-6261.1993.tb04758.x

ABSTRACT

It is generally optimal for risk‐sharing reasons to base a charge for information on the signal realization. When this is not possible, a charge based on the amount of trading, a brokerage commission, may be a good alternative. The optimal brokerage commission schedule is derived for a risk‐neutral information seller faced with risk‐averse purchasers who may differ in their risk aversion. Revenues from the brokerage commission are compared with those from a fixed charge for information and the optimal mutual fund management fee.

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