11.4. Bluffing

Another form of manipulation comes when a trader's intentions are deliberately misrepresented by, say, giving the impression that others are buying. Such bluffing can be very profitable. De la Vega again:

When a bull enters a coffee-house during the exchange hours, he is asked the price of the shares by the people present. He adds one to two percent to the price of the day and he produces a notebook in which he pretends to write down orders. The desire to buy shares increases.... Therefore, purchase orders are given to the cunning broker[;] ... he replies that he has so many other orders he cannot be at anyone else's disposal. The naïve questioner believes the sincerity of the statement ... and he gives an unrestricted order to another broker.[]

The result of such gamesmanship is an unwarranted price increase that favors the rumormonger, who sells at the top.

The strategies described by de la Vega faced some limitations, however. Manipulations in the seventeenth century took time because they were difficult to scale; spreading rumors one coffeehouse at a time was a slow way to access large numbers of traders. Further, it was not always clear that the spreading of rumors would have an impact in the sense that wary traders might not always act on what they heard. Finally, it was virtually impossible for the manipulator to remain anonymous, clearly a desirable feature when angry traders who had lost their shirts were looking for revenge!

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