WORKING PAPERS SERIES
WP06-08
Effects of Tobin Taxes in Minority
Game Markets
Ginwestra Bianconi, Tobias Galla and Matteo Marsili
arXiv:cond-mat/0603134v1 [cond-mat.dis-nn] 6 Mar 2006
E!ects of Tobin Taxes in Minority Game markets
Ginestra Bianconi,1, ! Tobias Galla,1, 2, † and Matteo Marsili1, ‡
1The Abdus Salam International Centre for Theoretical Physics, Strada Costiera 11, 34014 Trieste, Italy
2CNR-INFM, Trieste-SISSA Unit, V. Beirut 2-4, 34014 Trieste, Italy
(Dated: February 6, 2008)
We show that the introduction of Tobin taxes in agent-based models of currency markets can
lead to a reduction of speculative trading and reduce the magnitude of exchange rate fluctuations
at intermediate tax rates. In this regime revenues for the market maker obtained from speculators
are maximal. We here focus on Minority Game models of markets, which are accessible by exact
techniques from statistical mechanics. Results are supported by computer simulations. Our findings
suggest that at finite systems sizes the e!ect is most pronounced in a critical region around the phase
transition of the infinite system, but much weaker if the market is operating far from criticality and
does not exhibit anomalous fluctuations.
PACS numbers: PACS
I.
INTRODUCTION
In 1972 James Tobin proposed to “throw some sand in
the wheels of our excessively e!cient international money
markets” [2] by imposing a tax of 0.05 to 0.5% on all in-
ternational currency transactions. The Bretton Woods
agreement – a system of fixed foreign exchange rates tied
to the price of gold – at that time was gradually being
dismantled, with the USA stepping out in 1971. This
system had been introduced in the wake of World War
II in order to rebuild global capitalism. Tobin feared the
e"ects of countries exposed to freely fluctuating exchange
rates and suggested, as a second best solution, the intro-
duction of what is now called a ‘Tobin tax’ in order to
suppress speculative behaviour and thus containing ex-
change rates volatility within tenable levels.
Si