This work studies how the introduction of competition to the side of the market offering trading contracts affects the equilibrium investment profile in a bilateral investment game. By using a common agency framework, where contracts are not exclusive, we find that the equilibrium investment profile depends on the competitiveness of the equilibrium outcome. Full efficiency can only be implemented when the trading outcome is the most competitive. Moreover, lowering the outcome competitiveness is not always Pareto dominant for the par- ties offering the contracts and larger social welfare can be obtained with low competitive equilibria.
|Original language||English (US)|
|Number of pages||52|
|State||Published - Mar 2014|
|Name||TSE Working Papers|
|Publisher||Toulouse School of Economics|
- Economics, Econometrics and Finance(all)