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Ignore Sunk Costs (2009)

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Re: Ignore Sunk Costs (2009)

#51

Post by DubiousPusher »

dvt wrote: post #28
nullc wrote: post #25

Earlier quoted context omitted.

You don't need to invoke social narratives and consistent behaviors to justify honoring sunk costs. Sunk costs are often a predictor of a developed position. For example, you spend 20 years in advancing in field and then worry that you might not like it that much anymore. If you avoid leaving the field purely because of the sunk time, you are honoring a sunk cost. If you avoid leaving the field because your 20 years…

This is a good point and it was going to make it in my original post! I was going to say that the $1,000,000 price (as opposed to $100,000) tag on a piece of land will tend to be indicative of the value of the piece of land, assuming you weren't in a drunken stupor when you paid a million bucks for it. In other words, most decisions in life aren't bets made in a vacuum.

It is indicative of the value of the land but says very little about whether you should or in what way you should choose to develop either plot. The surrounding economy, zoning and geography will have far more to say about that.

Re: Ignore Sunk Costs (2009)

#52

Post by chepaslaaa »

readhn wrote: post #43
lubujackson wrote: post #5

Hold'em poker is specifically good at teaching this viscerally. Nothing lets you feel the mistake of valuing sunk costs than holding onto a once-strong starting hand way too long.

mistake is not in holding strong hand way too long. mistake is in not playing it.

you get called and the flop is shit, what do you do?

Re: Ignore Sunk Costs (2009)

#53

Post by NewEntryHN »

nullc wrote: post #25
dvt wrote: post #9

The "argument from waste," as economists call it, makes sense from a business and investment standpoint, but I'm a staunch believer that in every-day decision making (barring Vegas trips) it isn't usually a fallacy [1]. The paper cited is abstract (and borrows from Nozick, who also wrote a criticism of the sunken cost fallacy in the early 90s). But the conclusion is: > Sometimes it is reasonable to honor sunk costs.…

You don't need to invoke social narratives and consistent behaviors to justify honoring sunk costs. Sunk costs are often a predictor of a developed position. For example, you spend 20 years in advancing in field and then worry that you might not like it that much anymore. If you avoid leaving the field purely because of the sunk time, you are honoring a sunk cost. If you avoid leaving the field because your 20 years…

In this case you're merely using history to make a relevant choice about the future. You're not honoring the sunk cost because of the investment, you're just using the lessons your learnt while making this investment.

Re: Ignore Sunk Costs (2009)

#54

Post by NewEntryHN »

dvt wrote: post #9

The "argument from waste," as economists call it, makes sense from a business and investment standpoint, but I'm a staunch believer that in every-day decision making (barring Vegas trips) it isn't usually a fallacy [1]. The paper cited is abstract (and borrows from Nozick, who also wrote a criticism of the sunken cost fallacy in the early 90s). But the conclusion is: > Sometimes it is reasonable to honor sunk costs.…

> but not honoring them might hinder current (or future) cooperation.

Then you're not honoring sunk cost. You're honoring current or future costs, just like you should do.

Re: Ignore Sunk Costs (2009)

#55

Post by torstenvl »

> It turns out the amount of time you spent getting the tickets is irrelevant. If you wouldn’t be willing to PAY $500 for these tickets (and you weren’t, or you would have) then you should be willing to sell them for $500.

This example has nothing to do with sunk costs and everything to do with WTP vs. WTA. Some people -- like the author, apparently -- think they are the same. Those people are wrong.

Ask yourself - gun to your head, right now, how much money would you offer to pay the man threatening you right now for him to go away? And what is the minimum you would accept from him, if offered, to let him blow your brains out? Chances are, the amount you would be willing to accept for X is much much higher than the amount you would be willing to pay for ~X.

Or, from a different approach, if your willingness to pay to go to the event and your willingness to accept to not go to an event were identical, then going or not-going would have to be a wash. That's obviously not true, or you wouldn't have put so much effort into going.

Re: Ignore Sunk Costs (2009)

#57

Post by mikeryan »

turboturbo wrote: post #35
mikeryan wrote: post #34

Earlier quoted context omitted.

The Springsteen ticket example is a horrible one. It turns out the amount of time you spent getting the tickets is irrelevant. No its not my time is worth something.[1] If I spent 3 hours getting the tickets and I value my time at $150 an hour then the value of the tickets is now $505 and I'm only getting offered $500 Also the value of a ticket "To Me" may be worth more than $55 I spent. It might be worth $1000 in my…

The value of the tickets doesn’t increase with the effort you spent towards them.

Sure it does, my labor is why I’m now being offered $500 for $50 tickets.

Re: Ignore Sunk Costs (2009)

#59

Post by sabas123 »

DubiousPusher wrote: post #49
nullc wrote: post #36

Earlier quoted context omitted.

> You are just supposed to look at your options looking forward only. In most realistic scenarios your estimations of the payoff matrix has a significant uncertainty. It isn't just that there is risk, but your estimation of the risk is uncertain as well (as well as your estimation of your estimation, and so on). When reasoning under uncertainty we can usually achieve significant benefits from regularizing the decisio…

Man I cannot agree at all. I've personally seen some majorly bad decisions made on the backs of those fallacies.

And I've see it work out brilliantly

Re: Ignore Sunk Costs (2009)

#60

Post by nullc »

DubiousPusher wrote: post #49
nullc wrote: post #36

Earlier quoted context omitted.

> You are just supposed to look at your options looking forward only. In most realistic scenarios your estimations of the payoff matrix has a significant uncertainty. It isn't just that there is risk, but your estimation of the risk is uncertain as well (as well as your estimation of your estimation, and so on). When reasoning under uncertainty we can usually achieve significant benefits from regularizing the decisio…

Man I cannot agree at all. I've personally seen some majorly bad decisions made on the backs of those fallacies.

I've seen some people get killed after leaving their homes. Better stay inside all the time.
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