Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
The tick size in a financial market is the minimum allowable difference between ask and bid prices. By the rules of each exchange, no transactions can occur within the tick interval. The impact of tick size is an ongoing controversy which we study by experimental methods, whose simplicity helps distinguish among competing models of complex real-world securities markets. We observe patterns predicted by a matching (cooperative game) model. Because a price grid interferes with a competitive equilibrium and restrictions on order flow interfere with information aggregation, the matching model provides predictions when the competitive model cannot, although their predictions are the same when a competitive equilibrium does exist. Our experiments examine stable allocations, average prices, timing of order flow, information flow and price dynamics. Larger tick size invites more speculation, which in turn increases liquidity. However, increased speculation leads to inefficient trades that otherwise would not have occurred.