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The Ultimate Game of Economics

Have you heard about the ‘ultimate game of economics’? Here’s how it goes.

A person – let’s call him proposer – is given a hundred bucks and asked to split the money with a stranger, called responder. The split doesn’t need to be equal. Proposer could split it 50-50 or he could even keep 90 for himself and offer 10 to the stranger. But the condition is that if the responder rejects the offer, none of them get any money.

If you were the responder, at what split ratio would you accept the offer?

50-50? Most people would consider that fair. But is it rational?

What if you didn’t know about the total sum involved in the deal and you’re told only about the amount that proposer offers you? Isn’t it like a free money, something that you found lying on the street. Why would you reject even 5 bucks that way?

But that’s not how humans think. Right?

The knowledge that someone else got a better deal (at our cost) makes us humans feel cheated.

“Not fair,” we cry. “How dare the proposer offer less than 50 to me?” [Read more…]

Has the Govt. Laid Ground for the Next Big Bull Run?

Today’s post is written by Sunny Gupta, a long-time Safal Niveshak tribesman from New Delhi.

Sunny posted this originally on the Forum, seeking answers from fellow tribesmen. I thought putting this as a post would bring in a greater amount of discussion.

The points Sunny has raised, plus the questions he has asked, are important points for us as ‘aam aadmi’, and also matter a lot for us as investors.

Over to you, Sunny.

While this may be a complicated topic, and renowned economists would discuss such things, I want to bring it up and see how such events affect us as investors.

The topic is related to policy paralysis of past several months, and the sudden burst of policy actions related to fuel subsidy reduction and FDI allowance in various sectors.

[Read more…]