Insider Trading with Semi-Informed Traders and Information Sharing: The Stackelberg Game

We study a generalization of the Kyle (1985) static model with two risk neutral insiders to the case where each insider is partially informed about the value of the stock and compete under Stackelberg setting. First, we characterize the linear Bayesian equilibrium. Then, we carry out a comparative statics analysis. Our findings reveal that partial information increases the insiders profits in a Stackelberg setting than in a Cournot setting. Finally we study the impact of the information sharing on equilibrium outcomes.