文档介绍：Insiders, Outsiders, and
Market Breakdowns
Utpal Bhattacharya
University of Iowa
Matthew Spiegel
Columbia University
A simple classical Walrasian framework is pro-
posed for the study of manipulation among asym-
metrically informed risk-averse traders in finan-
cial markets, and it is used to analyze the
occurrence of a market breakdown in the trading
system. Such a phenomenon occurs when the out-
siders refuse to trade with the insiders because the
informational motive for trade of the insider out-
weighs her hedging motive. We demonstrate the
robustness of our results by proving that the mar-
ket collapse condition extends not only to the lin-
ear strategy action, but to the whole class of fea-
sible nonlinear strategy functions. Implications for
insider-trading regulation are sketched.
This article finds in closed form the entire set of noisy
rational expectations equilibria for a model of an
exchange economy characterized by asymmetric
information and strategic behavior. The model has
the following features. There is an informed risk-averse
monopolist and a continuum petitive risk-
averse uninformed traders. The basic structure of the
model includes strategic behavior by the informed
trader, a Walrasian price formation mechanism in
This article has benefited ments received from Jerome Detemple,
Jean-Francois Dreyfus, Larry Glosten, Bruce Greenwald, Gur Huberman,
Ananth Madhaven, Paul Pfleiderer, Herakles Polemarchakis, Anat Admati (the
referee) and the editors, Michael Brennan and Chester Spatt. Address reprint
requests to Matthew Spiegel, Columbia University, Graduate School of Busi-
ness, 414 Uris Hall, New York, NY 10027.
The Review of Financial Studies 1991 Volume 4, number 2, pp. 255-282
© 1991 The Review of Financial Studies 0893-9454/91/$
which traders submit demand functions, an endogenous motive for
trade due to the random endowment of the insider, and rational
expectations by the uninformed traders. Although