Experimental Economics

, Volume 14, Issue 1, pp 110–131 | Cite as

Pricing accuracy, liquidity and trader behavior with closing price manipulation



We study the effects of closing price manipulation in an experimental market to evaluate the social harm caused by manipulation. We find that manipulators, given incentives similar to many actual manipulation cases, decrease price accuracy and liquidity. The mere possibility of manipulation alters market participants’ behavior, leading to reduced liquidity. We find evidence that ordinary traders attempt to profitably counteract manipulation. This study provides examples of the strategies employed by manipulators, illustrates how these strategies change in the presence of detection penalties and assesses the ability of market participants to identify manipulation.


Manipulation Closing price High-closing Experimental market 

JEL Classification

G14 C90 


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Copyright information

© Economic Science Association 2010

Authors and Affiliations

  1. 1.Faculty of Economics and BusinessUniversity of SydneySydneyAustralia
  2. 2.Stockholm School of Economics in RigaRigaLatvia

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