From Trading Volume to Trading Number-Based Pricing at Home Trading System on Korean Stock Market

The new n-block tariff can outperforms, in terms of profit, two-part tariff, all unit discount price schedule, and uniform pricing for a given service and product. This research objectives are to develop new pricing unit and to determine the optimal price break points for n-block tariff on the new pricing unit. Although the merits of developing new pricing unit and non-linear pricing are well documented, the attempt to practice the new pricing unit development and non-linear pricing in online market has been relatively rare. The researchers found that transaction log file analysis using mixture model can be the feasible methodology for developing the new pricing unit and determining the optimal break points number of n-block tariff. The researchers empirically demonstrate the feasibility and the superiority of the mixture model by applying it to the log file on Home Trading System (HTS) for futures and option transaction at a stock company in Korea. The empirical results showed that the stock company had an opportunity to set new pricing unit from trading volume-based pricing to trading number-based pricing a given time horizon.