We study the behavior of a large trader with private information about the mean of an asset with a risky return. We argue that if the variability of the return is not too great, typically the trader will find it desirable to ensure that the market price does not reveal his information, that is, that a "pooling" equilibrium arises. Such an equilibrium has the advantage of avoiding the incentive constraints that arise in "separating" equilibria, where information can be inferred from prices. Thus the efficient market hypothesis may well fail if there is imperfect competition. Despite the uniformativeness of prices, the other (competitive) traders are also better off in the pooling equilibrium than in any separating equilibrium, again if one assumes limited variability.

We study the behavior of a large trader with private information about the mean of an asset with a risky return. We argue that if the variability of the return is not too great, typically the trader will find it desirable to ensure that the market price does not reveal his information, that is, that a "pooling" equilibrium arises. Such an equilibrium has the advantage of avoiding the incentive constraints that arise in "separating" equilibria, where information can be inferred from prices. Thus the efficient market hypothesis may well fail if there is imperfect competition. Despite the uniformativeness of prices, the other (competitive) traders are also better off in the pooling equilibrium than in any separating equilibrium, again if one assumes limited variability.

This paper studies the set of equilibrium payoffs in repeated games with long- and short-run players and little discounting. Because the short-run players are unconcerned about the future, each equilibrium outcome is constrained to lie on their static reaction (best-response) curves. The natural extension of the folk theorem to games of this sort would simply include this constraint in the definitions of the feasible payoffs and minmax values. In fact, this extension does obtain under the assumption that each player's choice of a mixed strategy for the stage game is publicly observable but, in contrast to standard repeated games, the set of equilibrium payoffs is different if players can observe only their opponents' realized actions.