Informed Trading and the "Leakage" of Information

This paper, in a Shapley-Shubik market game framework, examines the effect of "leakage" of information: private information becoming available to uninformed traders at a later date. We show that (a) If information acquisition by the informed traders is costless, this leads to faster revelation of information; (b) If information acquisition is costly, there may be no acquisition of information; (c) Information leakage leads to a fall in value of information and hence, increases the incentive for informed traders to sell the information.