The Effect of Insider Trading by a Dominant Trader in a Simple Securities Market Model
1985-03
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The Effect of Insider Trading by a Dominant Trader in a Simple Securities Market Model
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1985-03
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Center for Economic Research, Department of Economics, University of Minnesota
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Working Paper
Abstract
This paper studies the effects of strategic behavior by an informed trader
who is large relative to the remaining traders in a simple securities market
model. The strategic interaction among market participants is modelled as a
price-setting game in which the dominant trader sets price, taking into account
the reactions of uninformed traders who behave competitively. The equilibrium
outcomes of this game are compared with those which emerge when all traders act
as price-takers and/or all information is public. Besides characterizing the
informational efficiency of prices under alternative assumptions and describing
the dual advantages conferred by superior information and the ability to move
first and set prices, these comparisons help to determine whether observations
on equilibrium prices and quantities traded suffice to reveal the existence of.
strategic insider trading in an otherwise competitive market.
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Discussion Paper
212
212
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Altug, S., (1985), "The Effect of Insider Trading by a Dominant Trader in a Simple Securities Market Model", Discussion Paper No. 212, Center for Economic Research, Department of Economics, University of Minnesota.
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Altug, Sumru. (1985). The Effect of Insider Trading by a Dominant Trader in a Simple Securities Market Model. Retrieved from the University Digital Conservancy, https://hdl.handle.net/11299/55460.
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