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Ignore Sunk Costs (2009)

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Re: Ignore Sunk Costs (2009)

#61

Post by nine_k »

torstenvl wrote: post #55

> 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 - g…

The amount you are willing to pay is limited by what's available to you.

The amount you agree to accept (and likely pass down to your inheritors) is basically unlimited.

Re: Ignore Sunk Costs (2009)

#62

Post by FartyMcFarter »

The problem here is that sunk costs affect emotions, and humans are emotional beings. It's not all pure rationality.

It's all well and good to try and convince yourself that you made a rational decision against an emotional fallacy, but that doesn't always work.

Re: Ignore Sunk Costs (2009)

#63

Post by chiefalchemist »

mikeryan wrote: post #34
goldcd wrote: post #14

Of course you should ignore "sunk costs" - the problem is deciding what's a "sunk cost" and what's "an investment" with an associated probability on its return. To riff on the example say you were prepared to pay $300, you paid $55 and you're being offered $500 on the door. Yes. You probably would sell the tickets, for $445 profit. However maybe you flew into the city for $200 and booked a hotel for $100. You've now…

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…

Time is money. I think we'd also have to factor in the opportunity cost. You invested time in getting the tickets, which also denied you something else.

With regards to the tickets, I think the better question is: Will that ~$500 buy me an experience/memory as valuable as seeing Bruce? If, for example, the next thing on your bucket list is say $1500 then it's probably wise to stick with Bruce, and deal with what's next later.

Re: Ignore Sunk Costs (2009)

#64

Post by wtracy »

paulpauper wrote: post #24

Seth Godin's success is proof that mediocrity pays if you're early. >Or say you make a mistake and go to the concert instead of selling (those seats are $500 seats now). But Bruce is sick and Manfred Mann is substituting for him. You don’t like him so much. But you paid $500 for the seats! Should you stay? Well then the concert would be cancelled and you would get a refund. In regard to the sign, if it were accidenta…

In the sign example, just imagine that the customer made the misspelling in the original order. The sign maker probably isn't going to throw in free services to fix the customer's mistake.

Re: Ignore Sunk Costs (2009)

#65

Post by whatshisface »

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.

You can't make bias go away just by speaking its name.

Re: Ignore Sunk Costs (2009)

#66

Post by hoopluh »

baddox wrote: post #40
dvt wrote: post #19

Earlier quoted context omitted.

The idea is this: the "rational" thing would be to sell the tickets for $500 a pop. However, even if there's just a probability of cooperation and social rapport suffering†, it wouldn't be irrational to honor the sunk cost and still attend the concert. In the paper, the "Camping Rainstorm" example is similar in spirit. Instead of the protagonist suffering what the author calls a "diachronic misfortune," maybe in havi…

It’s not rational to choose receiving $500 and having your wife and friends be upset at you, unless you value the $500 more than having your wife and friends be on good terms with you. That’s a tautology, of course, but apparently it needs to be said.

This is the most correct answer I’ve seen in this thread. Not all costs are dollar prices.

Re: Ignore Sunk Costs (2009)

#67

Post by ken »

> Spend $250 on dinner and go buy better tickets for tomorrow night’s show.

Does he not understand how this works? Most touring musicians only play one night per city, e.g., [1]. It would cost me a lot more than $250 to follow Bruce from Seattle to NYC for his next show.

(He played every night On Broadway for a while but that was the exception.)

[1]: https://brucespringsteen.net/shows/2016

Re: Ignore Sunk Costs (2009)

#68

Post by im3w1l »

nullc wrote: post #36
asperous wrote: post #33

Earlier quoted context omitted.

For sunk costs, you are supposed to consider your all options including the sunk cost project. For your example your options might look like: * Stick with industry, 0 year lead time, no cost, possible sadness, low risk * Slight change, 2 year lead time, $20,000, moderate happiness, medium risk * Vast change, 10 year lead time, $100,000, unknown happiness, high risk The fallacy would be giving the first option some so…

> 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…

Maybe calling it sunk cost heuristic would be better? Acknowledging that most of the time it does work, and then explaining why in this particular situation it does not?

Re: Ignore Sunk Costs (2009)

#70

Post by harikb »

ken wrote: post #67

> Spend $250 on dinner and go buy better tickets for tomorrow night’s show. Does he not understand how this works? Most touring musicians only play one night per city, e.g., [1]. It would cost me a lot more than $250 to follow Bruce from Seattle to NYC for his next show. (He played every night On Broadway for a while but that was the exception.) [1]: https://brucespringsteen.net/shows/2016

That one is the most idiotic advice I have seen. He said “seats” so he was clearly taking someone there - a friend or girl friend? I can only imagine driving back after selling the ticket would probably meant the dinner was alone.
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