Inefficient Market Depth

An investor who uses a limit order in order to trade, instead of a market order, saves the bid-ask spread but incurs an execution delay. Thus, the use of limit orders slows down the rate at which gains from trade are realized, and then has a negative effect on welfare. Using comparative statics, I find that market depth and the execution delay of a limit order positively co-varies with each other, and negatively co-varies both with welfare. Indeed, when market depth arises from orders inefficiently queuing in the book, the execution delay is long. In practice, the execution delay of limit orders should be taken into consideration for a comprehensive assessment of execution quality