Sunk costs are costs that can not be recovered when new a planning decision is made. Taking them into account is therefore characterized as a fallacy. But are the examples below really fallacies?
[ Source: ] [1.] Imagine you go see a movie which costs $10 for a ticket. When you open your wallet or purse you realize you’ve lost a $10 bill. Would you still buy a ticket? You probably would. Only 12 percent of subjects said they wouldn’t.
[2.] Now, imagine you go to see the movie and pay $10 for a ticket, but right before you hand it over to get inside you realize you’ve lost it. Would you go back and buy another ticket? Maybe, but it would hurt a lot more. In the experiment, 54 percent of people said they would not.
The situation is the exact same. You lose $10 and then must pay $10 to see the movie, but the second scenario feels different. It seems as if the money was assigned to a specific purpose and then lost, and loss sucks. [...]
Source: p 276, Choices, Values, and Frames by Daniel Kahneman, Amos Tversky
Example 4. A family pays $40 for tickets to a basketball game to be played 60 miles from their home. On the day of the game there is a snowstorm. They decide to go anyway, but note in passing that had the tickets been given to them, they would have stayed home.
Example 5. A man joins a tennis club and pays a $300 yearly membership fee. After two weeks of playing he develops a tennis elbow. He continues to play (in pain) saying, "I don't want to waste the $300!"
For hypotheticals 1-5 above, if aversion to paying for the lost amount is the only reason for persisting (with the action that caused Sunk Costs), then I accept that 1-5 do exemplify the Sunk Cost Fallacy.
But did Profs Kahneman and Tversky consider the following possibility 6? Does 6 disprove the hypotheticals above as any Fallacy at all (a fortiori examples of the Sunk Cost Fallacy)?
- Suppose that in 1-5, loss of the money spent instigated so much agony or distress in the victim that the victim can no longer enjoy, and so abandons, the planned activity (e.g. the victim is too shocked by his carelessness or incompetence to care about the activity anymore).