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The Need for Fees at a DEX: How Increases in Fees Can Increase DEX Trading Volume

Joel Hasbrouck et al.

Management Science2026https://doi.org/10.1287/mnsc.2023.00726article
FT50UTD24AJG 4*ABDC A*
Weight
0.37

Abstract

We model endogenous trading and liquidity provision at a decentralized exchange (DEX) and demonstrate that increasing DEX trading fees can increase DEX trading volume. DEXs employ a mechanical pricing rule whereby price impacts decrease with inventory that DEXs acquire by offering fee revenues to investors. Consequently, higher DEX fees can incentivize higher inventory, thereby reducing price impacts. Moreover, the reduction of price impact can offset the increase in fees so that the marginal cost of DEX trading declines despite charging a higher trading fee. In turn, lower DEX marginal trading costs lead to an increase in DEX trading volume. This paper was accepted by Agostino Capponi, finance.

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https://doi.org/https://doi.org/10.1287/mnsc.2023.00726

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@article{joel2026,
  title        = {{The Need for Fees at a DEX: How Increases in Fees Can Increase DEX Trading Volume}},
  author       = {Joel Hasbrouck et al.},
  journal      = {Management Science},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1287/mnsc.2023.00726},
}

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The Need for Fees at a DEX: How Increases in Fees Can Increase DEX Trading Volume

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Evidence weight

0.37

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.16 × 0.4 = 0.06
M · momentum0.53 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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