KYLE INFORMED SPECULATION 327 (30)and the residual supply schedule (21),together with(22)and (23),to write the optimal x and resulting p*as 请=k立+(k,-1in+k (31) 2入，+p1/r* [A(1+k)+pi/"m+ki.+k (32) 2入+P1/x* Case 1A.For case 1A,the coefficient of pin in (32)is non-zero.Thus,(32)can be solved for pim in terms of p*and in.Plugging the result into (31)to express x as a function of in and p*rather than in and pim yields x特=k+k,-1)p*+k3 入(1+k)+p/r* if入(1+k1)+P/x*≠0. (33) Alternatively,observe that since the coefficient of pin in(32)is non-zero,linear combina- tions of p*and in span the same space as linear combinations of pim and in.Thus, E{pm,in)=E{p*,in).Using this fact and the residual supply schedulep*= pm+入，x*,(30)can be rewritten 漆E{创户，动-方萨+Ax选 (34) 2A,+p/r* Solving for x*in terms of p*and in yields 特-E⊙创选，-户 (35) 入，+P1/r* This is equivalent to(33). Case 1B.For Case 1B,the coefficient of pim in(32)is zero,the demand curve is a correspondence with the same price for each quantity,and(32)becomes p*-.+) ifA(1+k)+p/r*=0. (36) 2入1+pP1/r* This is the only case where the special assumptions underlying the market clearing rules come into play,and it does not arise in the equilibrium discussed below. Lemma 5.1 says that a monopolist has a demand schedule.That a monopsonist has a demand curve is at first glance a surprising proposition,since textbooks tell us otherwise. Figure 1 illustrates graphically the intuition behind the result.In the figure,MV denotes the monopsonist's marginal valuation schedule(the left-hand side of(29)),S denotes the supply schedule,and MS denotes the corresponding marginal cost schedule (the right-hand side of(29)).Equating marginal cost to marginal value yields the price-quantity pair chosen by the monopsonist.Now if the supply curve S shifts outward to S,this makes the marginal valuation schedule MV shift outward(to MV)as well,because the informed speculator's observation of his supply schedule affects his valuation.The new price-quantity combination is denoted x,p*.An analogous effect occurs if the supply schedule shifts downward to S".Now observe that the graph of maximizing price-quantity pairs for all supply schedules is the heavy-shaded straight line D.This line is the monopsonist's demand schedule