Strategic Trading of Informed Trader with Monopoly on Short-
and Long-Lived Information

Chanwoo Noh

and

Sungsub Choi

In his seminal paper, Kyle (1985) analyzed a market model with an informed trader who has monopoly on long-lived information. We consider a market with the same participants as in Kyle's, but where the informed trader has monopoly on two types of information, long-lived one and short-lived one. A necessary and sufficient condition for a market equilibrium in the form of a difference equation system is found, and a method of calculating a solution is suggested. The strategic behavior of the informed trader is analyzed with the emphasis on the interactive effect of the two types of information.