you are all invited to participate in the following seminar organized by QFinLab - Department of Mathematics, Politecnico di Milano.
Tuesday, 24 March 2026, 15.00-16.00
Leandro Sánchez-Betancourt (University of Oxford)
Title: Competition between DEXs through Dynamic Fees.
Abstract: We find an approximate Nash equilibrium in a game between decentralized exchanges (DEXs) that compete for order flow by setting dynamic trading fees. We characterize the equilibrium via a coupled system of partial
differential equations and derive tractable approximate closed-form expressions for the equilibrium fees. Our analysis shows that the two-regime structure found in monopoly models persists under competition: pools alternate between raising fees to deter arbitrage
and lowering fees to attract noise trading and increase volatility. Under competition, however, the switching boundary shifts from the oracle price to a weighted average of the oracle and competitors' exchange rates. Our numerical experiments show that, holding
total liquidity fixed, an increase in the number of competing DEXs reduces execution slippage for strategic liquidity takers and lowers fee revenue per DEX. Finally, the effect on noise traders' slippage depends on market activity: they are worse off in low-activity
markets but better off in high-activity ones.
All news can be found on the QFinLab
webpage.
The organizers: Michele Azzone and Alessandro Calvia.