In this paper, we extend the work of Jain-Mirman (2000,2002) and
Daher-Mirman (2006,2007) on studying the insider trading issues in the stock market
under a Cournot-Stackelberg duopoly.
Methodology/approach –This paper models the competition among the insiders in the
real market be Stackelberg which reflects that for all outside and inside reasons, the
position and influence of a firm may become the leader or the follower as time goes by.
Findings –It demonstrates that when the listed company with insiders becomes the
leader in the industry, the reaction functions of insiders will change as well as the
parameters of the market, to signal from real and financial sides, but the amount traded by
insiders remains the same; so does the degree of information revelation. In addition, for
the information revealed to the public, the stock price reveals more information with
Stackelberg real-leader model than that of the Stackelberg financial-leader model.
Originality/value –The main contribution of this paper is that market makers can very
well observe signals from the real side, and bringing a signal from the real side can help
the stock market reveal more information, but once the signal is introduced, it may not
further enhance market efficiency.