Abstract
Chakraborty and Yilmaz (2004a, b) con? sider strategic models of repeated trading an informed insider with long-lived private infor? mation. They show that, if market makers face uncertainty about the existence of informed trades in the order flow then, with sufficiently many periods of trading, the insider will bluff in every equilibrium in the precise sense ruled out in Albert S. Kyle (1985, 1323), i.e., by first destabilizing prices with unprofitable trades made at the nth auction, then recouping the losses and much more with profitable trades at future auctions. By bluffing, the insider adds noise to the market's inference problem and makes prices less sensitive to his trades. In this note, we demonstrate how the scope for profitable bluffing is enhanced the pres? ence of other rational informed traders in the
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