City Research Online

Abstract

In this paper, we study the relationship between the market structure in the real sector and the effects of insider trading. We find that the market structure in the real sector matters. When the monopolist insider chooses the price of the real good rather than the output, insider trading increases the price rather than the quantity. When the insider competes with another firm in the real sector, and chooses quantity, the output increases due to insider trading but by less than in monopoly models. In addition, the stock price is more informative than in monopoly models.

Publication Type:	Article
Additional Information:	NOTICE: this is the author’s version of a work that was accepted for publication in <Journal title>. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in The Quarterly Review of Economics and Finance, Volume 42, Issue 1, Spring 2002, Pages 19–39, http://dx.doi.org/10.1016/S1062-9769(01)00113-2
Publisher Keywords:	Insider trading; Stock price; Information; Correlated signals; Market structure
Subjects:	H Social Sciences > HB Economic Theory
Departments:	School of Policy & Global Affairs > Economics
SWORD Depositor:	Symplectic Administrator

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