In 1982, 3 economists created an experiment on economic theory.<\/p>\n
The rules are simple:<\/p>\n
* Player 1 has the money and proposes how to utilise.<\/p>\n
* Player 2 can accept or reject the proposal.<\/p>\n
Traditional Economic theory says that Player 2 should accept any amount as far as it adds to money in to his pocket. But when real people played, many of them consistently rejected the proposal when they seemed unfair to them!<\/p>\n
This theory reveals profound about human behaviour. Player 2 literally deny opportunity at his own expense to enforce fairness norms.<\/p>\n
One particular conversation worth to mention on how deeply \u2014 the Ultimatum Game – shapes investor behaviour.<\/p>\n
It was a Tuesday morning when one investor, Mr. Shah walked into our office. A successful businessman just sold a property and wanted to invest the proceeds\u2014Rs. 2 crore\u2014in mutual funds. We talked about his investment suitability, risk appetite, investment horizon, diversification and not following past performance for scheme selection.<\/p>\n
But Mr. Shah leaned back and said, \u201cThat\u2019s all okay. I need at least 18%. I\u2019ve heard of funds giving 20%+. I\u2019m the one taking the risk.\u201d He became Player 1.<\/p>\n
His \u201coffer\u201d demanding 18% returns felt like a split that ignored the realities of the market, the effort behind strategy, and the principles of sustainable returns. As player 2 of the Ultimatum game, I had to deny his terms of high expectations. I replied, \u201cwe must follow fundamental investing. I can\u2019t offer you which compromise your capital\u2019s long-term wealth. I\u2019d rather walk away from this proposal than put us both in a misaligned position.\u201d<\/p>\n
In investing, fairness trumps greed. At Shalibhadra, our role isn\u2019t to agree to every demand\u2014but to protect the integrity of the every transaction, even if it means risking rejection. Because in the long run, trust is built not on maximum gains, but on mutual respect.<\/p>\n
Nishit Siddharth Shah<\/p>\n","protected":false},"excerpt":{"rendered":"
The Ultimatum Game In 1982, 3 economists created an experiment on economic theory. The rules are simple: * Player 1 has the money and proposes how to utilise. * Player 2 can accept or reject the proposal. Traditional Economic theory says that Player 2 should accept any amount as far as it adds to money […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[36,35,13,11,18,3,17,34,22,37,29,30,32,31,38,5,14,16,8,6,10,2,4,12,9,39,47,19,48,25,27,23,26,28,24,15,40,7,33,20],"class_list":["post-351","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-asset-allocation","tag-bear-market","tag-best-fund-manager","tag-best-mutual-fund","tag-best-mutual-fund-sip","tag-best-planning-for-young","tag-best-sip","tag-bull-market","tag-committed-to-investor","tag-dynamic-asset-allocation","tag-financial-wisdom","tag-how-to-invest","tag-how-to-invest-in-mutual-fund","tag-how-to-invest-in-mutual-funds","tag-how-to-invest-in-this-market","tag-how-to-make-financial-planning","tag-how-to-select-fund-manager","tag-how-to-start-sip","tag-invest-for-future","tag-invest-with-financial-plan","tag-investment","tag-investment-for-young","tag-investor","tag-manager","tag-mutual-fund","tag-mutual-fund-india","tag-mutual-fund-investment","tag-mutual-fund-sahi-hai","tag-mutual-fund-sip","tag-select-best-fund","tag-select-best-mutual-fund","tag-select-best-scheme","tag-select-top-fund","tag-select-top-mutual-fund","tag-select-top-scheme","tag-sip","tag-sip-mutual-fund","tag-spend-less-and-invest-more","tag-star-fund-manager","tag-top-mutual-funds"],"yoast_head":"\n