On many important multi-dealer platforms, customers mostly request quotes from very few dealers. I build a model of multi-dealer platforms, where dealers strategically choose to respond to or ignore a request. If the customer contacts more dealers, each dealer responds with a lower probability and offers a stochastically worse price when responding. Dealers’ strategic avoidance of competition overturns the customer’s benefit from potentially receiving more quotes, worsening her best-overall price. In equilibrium, the customer contacts only two dealers. Multi-dealer platforms have limited ability to promote price competition: No design of information disclosure can improve the customer’s payoff above this outcome.

We show that larger trades incur lower trading costs in government bond markets (“size discount”), but costs increase in trade size after controlling for client identity (“size penalty”). The size discount is driven by the cross-client variation of larger traders obtaining better prices, consistent with theories of trading with imperfect competition. The size penalty, driven by the within-client variation, is larger for corporate bonds, during major macroeconomic surprises and during COVID-19. These differences are larger among more sophisticated clients, consistent with information-based theories.

Over‐the‐counter (OTC) trading thrives despite competition from exchanges. We let OTC dealers cream skim from exchanges in an otherwise standard Glosten and Milgrom framework. Restricting the dealer's ability to cream skim induces “cheap substitution”: some traders exit while others with larger gains from trade enter. Cheap substitution implies trading costs, trade volumes, and market shares are poor policy indicators. In a benchmark case, restricting the dealer raises welfare only if trading cost increases, volume falls, and OTC market share is high. By contrast, the restriction improves welfare when adverse selection risk is low. A simple procedure implements the optimal Pigouvian tax.