The effective bid-ask spread measured relative to the spread midpoint overstates the trueeffective bid-ask spread in markets with discrete prices and elastic liquidity demand. Theaverage bias is 13%–18% for S&P 500 stocks in general, depending on the estimator usedas benchmark, and up to 97% for low-priced stocks. Cross-sectional bias variation acrossstocks, trading venues, and investor groups can influence research inference. The use of themidpoint also undermines liquidity timing and trading performance evaluations, and canlead non-sophisticated investors to overpay for liquidity. To overcome these problems, thepaper proposes new estimators of the effective bid-ask spread.