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This is an interesting but fairly esoteric point. It requires the following to be true 1. The bluffer knows some secret information that is not known by other
by dejb 18y ago
This is an interesting but fairly esoteric point. It requires the following to be true
1. The bluffer knows some secret information that is not known by other participants.
2. All other market participants must believe the the bluffer is acting on secret information by their bet.
In a market with many users and anonymous trading I can't see it being worth the risk to bluff. There are bound to be traders out there who will simply accept your money when you bet for the 'impossible' result and any money you make by betting the other way is not likely to compensate.
With non-anonymous trading it is possible that a trader with a high reputation could pull this off but they would damage their reputation in the process.
- stcredzero 18y agoApparently, Nathan Rothschild used this gambit on the London Stock Exchange. He had a trusted confederate observe the battle of Waterloo, then rush to London the moment he determined the outcome of the battle. (Some hours before it ended.) Nathan then received this news, then acted as if the opposite were true in order to manipulate the market to his advantage. http://www.rumormillnews.com/cgi-bin/archive.cgi/noframes/read/39506 http://www.rumormillnews.com/cgi-bin/archive.cgi/noframes/re...
- dejb 18y agoInteresting information. So it can work once. He obviously had a significant reputation before this and I'll bet people were a lot more suspicious of his moves in the future.
- stcredzero 18y agoHis reputation suffered in one respect, but he made so much money and gained so much power, it was worth it. In the eyes of many, his reputation as a shrewd and canny operator was confirmed.