  We propose a static equilibrium model for limit order book where
profit-maximizing investors receive an information signal regarding the
liquidation value of the asset and execute via a competitive dealer with random
initial inventory, who trades against a competitive limit order book populated
by liquidity suppliers. We show that an equilibrium exists for bounded signal
distributions, obtain closed form solutions for Bernoulli-type signals and
propose a straightforward iterative algorithm to compute the equilibrium order
book for the general case. We obtain the exact analytic asymptotics for the
market impact of large trades and show that the functional form depends on the
tail distribution of the private signal of the insiders. In particular, the
impact follows a power law if the signal has fat tails while the law is
logarithmic in case of lighter tails. Moreover, the tail distribution of the
trade volume in equilibrium obeys a power law in our model. We find that the
liquidity suppliers charge a minimum bid-ask spread that is independent of the
amount of `noise' trading but increasing in the degree of informational
advantage of insiders in equilibrium. The model also predicts that the order
book flattens as the amount of noise trading increases converging to a model
with proportional transactions costs.. Competition among the insiders leads to
aggressive trading causing the aggregate profit to vanish in the limiting case
$N\to\infty$. The numerical results also show that the spread increases with
the number of insiders keeping the other parameters fixed. Finally, an
equilibrium may not exist if the liquidation value is unbounded. We conjecture
that existence of equilibrium requires a sufficient amount of competition among
insiders if the signal distribution exhibit fat tails.
