Price discovery and gains from trade in asset markets with insider trading

The present study contributes to the ongoing debate on possible costs and benefits of insider trading. We a novel call auction model with information. Our predicts that more information improves informational efficiency prices, but this comes at expense reduced gains from trade. Testing these hypotheses in lab, we find increases prices does not decrease realized further perform worse than continuous double auction. In fact, when probability is high, has most informative highest experiment provides new evidence, markets very asymmetrically dispersed information, lends support decision by many stock exchanges use auctions asymmetries are severe need for accurate large, e.g. open or close trading day.