Search Results

Documents authored by Anchuri, Pranay


Document
Price Elasticity of Gas Demand on L1 and L2: Evidence from Ethereum and Arbitrum

Authors: Pranay Anchuri and Akaki Mamageishvili

Published in: LIPIcs, Volume 395, 8th Conference on Advances in Financial Technologies (AFT 2026)


Abstract
We estimate the causal price elasticity of gas demand on Ethereum mainnet (L1) and Arbitrum One (L2), a quantity necessary for calibrating fee mechanism simulations, evaluating resource pricing reforms, and explaining observed usage patterns. A two-way fixed effects panel regression instrumented by each wallet’s own lagged base fee removes the congestion-driven endogeneity that causes naive regressions to substantially underestimate demand sensitivity. On Ethereum mainnet (full year 2025), the pooled IV elasticity is -0.006^{***}, near-inelastic: a 10% fee increase reduces total gas demand by approximately 0.06%. On Arbitrum One (October 2025-April 2026), the pooled IV elasticity is -0.036^{**}. Both chains are inelastic in the aggregate, with L2 measurably more responsive than L1. A per-resource decomposition of L2 demand reveals elasticities ranging from modestly elastic computation (-0.027^{*}) to -0.27^{***} for refunds, with storage growth (-0.15^{***}) and calldata (-0.06^{*}) in between. Behavioral clustering identifies always-on protocol wallets as near-inelastic and high-volume operators as substantially more responsive, with cluster-level elasticities up to roughly 6× the pooled estimate. These results establish an empirical foundation for downstream simulations and for evaluating fee mechanism designs.

Cite as

Pranay Anchuri and Akaki Mamageishvili. Price Elasticity of Gas Demand on L1 and L2: Evidence from Ethereum and Arbitrum. In 8th Conference on Advances in Financial Technologies (AFT 2026). Leibniz International Proceedings in Informatics (LIPIcs), Volume 395, pp. 35:1-35:23, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2026)


Copy BibTex To Clipboard

@InProceedings{anchuri_et_al:LIPIcs.AFT.2026.35,
  author =	{Anchuri, Pranay and Mamageishvili, Akaki},
  title =	{{Price Elasticity of Gas Demand on L1 and L2: Evidence from Ethereum and Arbitrum}},
  booktitle =	{8th Conference on Advances in Financial Technologies (AFT 2026)},
  pages =	{35:1--35:23},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-95977-451-2},
  ISSN =	{1868-8969},
  year =	{2026},
  volume =	{395},
  editor =	{Kiayias, Aggelos and Kyropoulou, Maria},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops.dagstuhl.de/entities/document/10.4230/LIPIcs.AFT.2026.35},
  URN =		{urn:nbn:de:0030-drops-278895},
  doi =		{10.4230/LIPIcs.AFT.2026.35},
  annote =	{Keywords: gas pricing, demand elasticity, instrumental variables, panel data, fixed effects, Arbitrum, Ethereum, transaction fee mechanism}
}

Any Issues?
X

Feedback on the Current Page

CAPTCHA

Thanks for your feedback!

Feedback submitted to Dagstuhl Publishing

Could not send message

Please try again later or send an E-mail