Manipulation of the Commodity Futures Market Delivery Process.

An analysis of the futures market delivery 'end game' specifies necessary and sufficient conditions for long and short traders to manipulate futures prices at contract expiration. The empirical and welfare implications of manipulation are derived as well. Manipulation is most likely to occur in markets where economic frictions (such as transportation and transactions costs) make it inefficient to return excessive deliveries to their original owners. These consumption distortions induce price changes that favor manipulators. Manipulation may also occur in markets where such costs are unimportant but the necessary conditions for the manipulation of a frictionless market are very restrictive. Copyright 1993 by University of Chicago Press.