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Can we make trading less hazardous to investors’ wealth? Evidence from a choice between flat rates or commissions for financial services

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Listed:
  • Meyer, Steffen
  • Uhr, Charline

Abstract

We exploit a real-world setting at a German brokerage where some investors are forced to choose between two pricing schemes for trading and holding mutual funds: a flat-rate versus commissions (pay-per-use, via front-end loads and annual fees). Advisors provide a tariff recommendation based on clients’ potential cost savings. Most clients follow this recommendation; still, 41% fail to choose the cost-beneficial scheme, and 83% of them exhibit a pay-per-use bias. Biased choices are partly related to the underestimation of trading costs and expectation-based loss aversion. Our results bear implications for designing pricing schemes in the financial industry.

Suggested Citation

  • Meyer, Steffen & Uhr, Charline, 2026. "Can we make trading less hazardous to investors’ wealth? Evidence from a choice between flat rates or commissions for financial services," Journal of Economic Behavior & Organization, Elsevier, vol. 248(C).
    • Handle: RePEc:eee:jeborg:v:248:y:2026:i:c:s016726812600212x
    DOI: 10.1016/j.jebo.2026.107626
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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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