Expanding an Information-Based Model Based on Inside and Outside Private Information

Document Type : Research Paper


1 PhD Student, Faculty of Economics, University of Tehran

2 Associate Professor, Faculty of Economics, University of Tehran

3 Associate Professor, Faculty of Management, University of Tehran


This paper extends an information-based model for an order market with asymmetric information. The new assumption in this expanded model is that possibility of asymmetric influence of changes in inside and outside information. However, other models generally assume that changes in these two types of information have the same value, or focus only on changes in internal information.
Therefore, in the new extended model, uninformed traders face informed internal and external traders. In the new equilibrium, when the effect of external information is larger than that of internal information for the stock, in the optimal case uninformed traders choose a lower bid price and a higher ask price as the equality effect of these two types of information, and in the opposite case they choose a higher bid price and a lower ask price.
JEL Classification: G14, D82


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Volume 56, Issue 2 - Serial Number 135
December 2021
Pages 205-255
  • Receive Date: 03 August 2021
  • Revise Date: 27 November 2021
  • Accept Date: 08 December 2021
  • First Publish Date: 08 December 2021