After the attack in the house, make sure you still have the incendiary grenade from upstairs. When you see the Merchant, look at his eyes with a rifle scope. If they are red, throw the incendiary grenade at him. He will scream similar to the male villagers when you throw an incendiary grenade at them. Note: In different areas the scream vary. For example, at the island he will scream like a soldier.