Principal Trading Procurement : Competition and Information Leakage

We model procurement auctions held by institutional traders seeking fulfillment for large trades. The dealer who wins such an auction might fill the order out of inventory or access the market for additional volumes. How many dealers should the trader contact? There is a general tradeoff: an additional dealer intensifies competition and may improve matchmaking, but also intensifies information leakage. We show that information leakage can be an endogenous search friction in that the trader does not always contact all available dealers. There is also a question of information design: what should the trader reveal about her desired trade? In the model, it is optimal to provide no information at the bidding stage. There are also implications for market design and regulation