| Abstract: |
We model stock price manipulation when the manipulator is in the role of an
intermediary (broker). We find that in the absence of superior information,
the broker can manipulate equilibrium outcomes without losing its credibility
with respect to accurate forecasting. The result extends to the case when the
broker prefers more investment to come into the market. However, when moderate
competition among brokers is introduced then the investors get their favorite
outcome. When competition exceeds a certain threshold, neither the brokers nor
the investors get their respective favorite outcomes. In any case, if the
broker bias for more investment dominates competition, the brokers get their
favorite outcome at the expense of investors. |