The Effect of Insider Trading by a Dominant Trader in a Simple Securities Market Model

Loading...
Thumbnail Image

View/Download File

Persistent link to this item

Statistics
View Statistics

Journal Title

Journal ISSN

Volume Title

Title

The Effect of Insider Trading by a Dominant Trader in a Simple Securities Market Model

Published Date

1985-03

Publisher

Center for Economic Research, Department of Economics, University of Minnesota

Type

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.

Keywords

Description

Related to

Replaces

License

Series/Report Number

Funding information

Isbn identifier

Doi identifier

Previously Published Citation

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.

Suggested citation

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.

Content distributed via the University Digital Conservancy may be subject to additional license and use restrictions applied by the depositor. By using these files, users agree to the Terms of Use. Materials in the UDC may contain content that is disturbing and/or harmful. For more information, please see our statement on harmful content in digital repositories.