We analyze the effects of the observed increased share of delegated capital for trading strategies and equilibrium prices. We introduce delegation into a standard Lucas exchange economy, where in equilibrium some investors trade on their own account, but others decide to delegate trading to...

This paper provides a theory of dynamic formation of relationships in over-the-counter markets. I show that in equilibrium markets are dealer-centric. Two forces drive the formation of networks of relationships that have a core-periphery structure. First, agents develop enduring relationships to...