Fabretti, Annalisa; Gärling, Tommy; Herzel, Stefano; … - Centro di Studi Internazionali Sull'Economia e la … - 2015
incentives, e.g. option-like compensation. We document that convex incentives are associated with (i) higher prices, (ii) larger … variations of prices, and (iii) larger bid-ask spreads. We conclude that convex incentives may lead to decreased stability of … financial markets. Our analysis suggests that the decreased stability is driven by the fact that convex incentives pushes agents …