Consider strategic risk-neutral traders competing in schedules to supply liquidity to a risk-averse agent who is privately informed about the value of the asset and his hedging needs. Imperfect competition in this common¨alue en¨ironment is analyzed as a multiprincipal game in which liquidity suppliers offer trading mechanisms in a decentralized way. Each liquidity supplier behaves as a monopolist facing a residual demand curve resulting from the maximizing behavior of the informed agent and the trading mechanisms offered by his competitors. There exists a unique equilibrium in convex schedules. It is symmetric and differentiable and exhibits typical features of market-power: Equilibrium trading volume is lower than ex ante efficiency would require. Liquidity suppliers charge positive mark-ups and make positive expected profits, but these profits decrease with the Ž . number of competitors. In the limit, as this number goes to infinity, ask resp. bid prices Ž . Ž . converge towards the upper resp. lower tail expectations obtained in Glosten 1994 and expected profits are zero.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In the context of common agency adverse-selection games we illustrate that the revelation principle cannot be applied to study equilibria of the multi-principal games. We then demonstrate that an extension of the taxation principle -what we term the "delegation principle" -can be used to characterize the set of all common agency equilibria. Terms of use: Documents inJEL Classification: D82, L51.

This paper analyzes whether the two tasks of building infrastructures which are socially useful in providing public services and managing these assets should be bundled or not. When performance contracts can be written, both tasks should be performed altogether by the same firm if a better design of the infrastructure helps also to save on operating costs. Otherwise, tasks should be kept apart and undertaken by different units. In incomplete contracting environments we isolate conditions under which either the traditional form of public provision of services or the more fashionable public-private partnership emerges optimally. The latter dominates when there is a positive externality and the private benefits from owning assets are small enough. Finally, we take a political economy perspective and study how incentive schemes are modified under the threat of capture of the decision-makers. Much of the gains from bundling may be lost in this case.

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