Some Thoughts on the Sunk Cost Fallacy

Bluejays tickets.  Photo by shareski.As you read this, my wife, my father, and I are planning on going to the Texas Rangers game tonight against the Toronto Blue Jays at Rangers Ballpark in Arlington, TX. I love going to major league baseball games and one of my smaller goals is to eventually visit every major league ballpark.

In order to get cheaper tickets, we bought the tickets in advance – they’re already paid for and printed out. We’re all ready to go to the game.

But let’s say it gets to be 6 PM this evening and our son is sick, or my dad gets tired and doesn’t feel like going.

It might make sense for me to want to push everyone to go to the ball game. After all, I already have the money invested in the tickets – we wouldn’t want that to go to waste.

In reality, though, it doesn’t actually make any sense to choose the less enjoyable option this evening if things turn out that way.

Think about it this way. I’ve already paid for the tickets – there’s no refund, no matter what we choose to do. So, in essence, all those tickets are really saying is “you have the ability to now go to the Rangers game for free this evening.”

The cost of those tickets is already sunk. It doesn’t matter what we do this evening – we’re not going to get the cost of those tickets back.

Believing that you must go to the game in order to somehow recover some value is the sunk cost fallacy – and it can be dangerous.

Here’s another example. Not too long ago, one of my readers preordered EA Sports Active for the Wii – he used Wii Fit a lot and wanted to go “beyond” it and do more cardio work. So, he paid $1 to reserve a copy at Target.

On the day of release, though, he found that he could get a free $10 gift card at Best Buy for buying a copy. He stopped at the Best Buy (next door to the Target) and picked up his copy there.

What about that $1 sunk cost at Target? Well, it was already sunk. All it did was give him a choice – pay $58.99 for the game at Target, or pay $59.99 for the game plus a $10 gift card at Best Buy. He chose the latter because the cost was sunk either way.

Here are three general ways that the sunk cost fallacy can hurt your happiness (without helping your wallet) or hurt your wallet directly.

First, it can convince you to make a poor choice about how to spend your time. In the example above, if I talked everyone into going to the Rangers game – and no one really wanted to go – under the idea that I had to somehow recover some of that sunk cost, all I’m really doing is making the evening worse for everyone. Instead, one should forget about the money entirely once you can’t recover it and make the best choice at the moment for everyone involved.

Second, it can saddle you with more debt than value. Think of people who are upside down in their car loans or upside down in their mortgage. They have already sunk money into those assets, but now the assets are still worth less than what is owed on them.

Third, it can lead you to poor investing decisions. People with investments in a dying company will often tell themselves that they can’t pull out now because they have too much invested in it – and then they lose everything. Just because you’ve invested $100,000 in something doesn’t mean it’s not the right choice to pull your investment out for $30,000 – it might be the choice to make if the investment is dying on the vine. That sunk cost doesn’t matter – what matters is getting the maximum return from where you’re sitting right now.

A few more thoughts about sunk costs and the sunk cost fallacy:

You should avoid sunk costs unless it’s highly certain that you’re going to actually do something. Most of the time, if you pay ahead for an event or an item, it’s so you can get a better deal – that’s why we bought Rangers tickets early, for example. However, if there’s a significant chance that you won’t go, you’re better off not sinking that cost in advance.

Think about it this way. There’s a good chance you’re going to go to a concert this Saturday, but you’re open to other things coming up. You can buy nonrefundable tickets in advance for $12 or at the door for $15. Which should you do? Buy at the door, of course. That way, if something comes up, you can follow the better path. Now, on the other hand, the concert might be by your favorite band ever and wild horses couldn’t keep you from going. If that’s the case, buy the tickets in advance. “I’ll do this if nothing better comes along” is not a good basis for sinking the cost.

Sometimes you can’t avoid a sunk cost – so just seek to minimize its impact. This is why you should make a large down payment on a car or home – or pay for it entirely in cash. A small down payment on a home – under 20% – makes the sunk cost worse because now you also have to sink money into mortgage insurance, for example. PMI payments are sunk costs. Similarly, if you buy a new car and don’t make a down payment, you often have to have insurance to cover that depreciation – again, an additional sunk cost. Make choices that avoid these sunk costs.

Sunk costs are often tricky. If you move into an apartment with a metro stop right outside the door and another metro stop right in front of your place of employment or school, it makes a lot of sense to sink your money into a bus pass. Now, imagine that you’re fired the next day. Suddenly, you’d like to have that $50 back.

Yet, I would still sink the cost, even with that risk. Why? Here, the bus pass has more than one use. You can ride the bus to more job interviews. You can use the bus pass to go get groceries. You can use the bus pass to visit friends.

What’s the take home message? Always make the best decision now. Don’t let yourself be swayed by money you’ve already spent and can’t get back. Instead, avoid that trap when you can.

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53 thoughts on “Some Thoughts on the Sunk Cost Fallacy

  1. Jill says:

    ahh the Blue Jays…

    I watched them lose to Kansas City on Saturday in Toronto, and how I wish that their winning ways from the start of the season would stay with them.

    Enjoy the game!

  2. Robin Crickman says:

    I found this a very good post. There is one additional point about sunk costs that folks should
    perhaps consider. When you pay for something in advance, you are making the seller of the item an
    unsecured loan. Some of my friends found this out
    to their woe a few months back. They wanted to go on an adventure sort of vacation and people had to book the trip in advance (and pay for it at the time of booking). Several hundred dollars per person. Just as they were about to depart for the vacation, the organizer was declared to be insolvent and bankruptcy proceedings were started. The people who had paid for their vacations were simply considered another creditor and got neither their vacation nor a refund of the
    money they had paid. About the only protection
    I have heard of for this problem is to pay with
    a credit card and pay fairly close to the date of
    receipt of the product or service. Then you can
    dispute the charge through the credit card company
    if you do not receive what you are being charged
    for. This helped one buyer of the vacation package I mentioned above.

  3. Very interesting article! I have found that sunk costs can be very difficult to deal with emotionally. Even though, for example, I should skip that ball game, I feel HORRIBLE if I do. I agree that the best way to deal with sunk costs is to try and avoid them altogether. The less risk you have for a sunk cost, the less likely you are to be forced to deal with one.

  4. JMP says:

    Good post. The example also goes to the issue of “What is the point of efficiency anyhow?” Under traditional economic theory, the moment you spent money on the tickets, you had already “wasted” the money. Whether you went and enjoyed the game, went and had a miserable time, or did not go at all, you had no chance of “recovering” the cost. But if viewed under behavioral economics, there is some intrinsic value in ‘happiness’. As such, the ‘efficient’ answer is to do what you enjoy, even if its technically ‘inefficient’.

  5. liv says:

    how many baseball stadiums have you hit and have you figured out a frugal way to do that? and if/when you do, can you tell me so i can help my BF out with that because he wants to hit every single one too.

  6. Shaun says:

    Being so close, I have to imagine that you have already hit a Royals game here in KC. If that’s the case, you really should make it out again. With all the new improvements to Kaufmann, its like a whole new stadium!

  7. 60 in 3 - Health and Fitness says:

    Sunk costs applies everywhere. For example, food. People will finish off a meal even if they’re not hungry because they’ve already paid for it. That’s sunk costs right there and it causes people to make a poor decision at times.

    Gal

  8. Keith@bewealthygethappy says:

    Trent,

    I think this is one of your best posts in a long time. One of the things that I don’t see a lot of PF bloggers talking about is the impact of psychology on our spending. This applies to how we react to advertising just as much as it applies to spending, like what you are talking about in your article. Great job!

  9. Nate says:

    I agree on the whole with what you’re saying but blanket advice to make a “large downpayment” on a car or home is fairly reckless. Consider the following:
    1) On a house, PMI can be paid up front for 1% of less of the loan amount. Depending on the state, this amount can be paid by the seller, allowing the the buyer to effectively finance the fee over 30 years. In uncertain economic times and with low home interest rates, it seems more prudent to keep the extra cash on hand though every case is different.
    2) Car loans are insanely cheap right now. If you can finance a car at a lower rate than you can get in a savings account (you can finance at 1.9% for 60 months and Ally is paying 2.05%), why wouldn’t you finance every dollar you could? You would not only make money on the deal, but you keep that extra cash on hand in case something happens in the short term.

  10. Dee says:

    True, you won’t get your money back no matter what you do, but you also don’t want to get in the habit of being wasteful.

    Can’t get money back on the tickets? Fine, give them away.

    Bought some food and not a big fan (say, a certain type of cookie, etc.)? Give the rest away.

  11. Steve says:

    Another aspect of the bus pass situation is that you didn’t know you would be laid off the next day. “Hindsight is 20/20″ or “There’s no use crying over spilt milk.” Even in today’s economy, your odds of getting laid off on any given day are really quite small, and in any given month still rather small. The exception is if you’ve gotten any credible, specific information to the contrary.

  12. Baseball Fan says:

    Been to 15 stadiums – my advice:

    1. Bleacher seats are often the best value, the fans in the cheap seats have more “flavor”
    2. Walk up to the stadium to buy tickets if possible – stick it to Ticketmaster and their convenience fees
    3. Arrive early – wander around to see the sights before the game starts
    4. If you’re not that into classic “ballpark food”, eat before you get in the stadium or bring in some food of your own

  13. Canadian Kate says:

    I had an interesting situation that may fall under ‘sunk cost.’

    I had a dying aunt on the east coast. I had a unemployed home-sick daughter on the west coast who wanted her mommy to visit. I put aside dates for a visit but put off booking the flights in case 1) aunt died or 2) daughter got job and didn’t need mommy any more.

    Finally, I booked my flight when I thought prices were not going to get any lower. Of course, within days, aunt dies, funeral is for the day I’m to fly west. I call to cancel the outbound flight. Cost of unused ticket is $800 but to get access to that money I need to pay $100 change fee.

    Here’s the sunk cost part: I could immediately rebook, flying east first, then west to start up my visit with my daughter. But the online seats available were over $300 cheaper than the seats the ticket agent could ‘see.’ Therefore, I’d have to pay $300 more to use the credit immediately.

    So I put aside the credit, buy my seats online for less money and take the trips. BTW: daughter got a job the last day of my visit. Life is good.

    Except I have this big credit with the airline. And one of the conditions is that any ticket I buy with the credit must be worth at least as much as the credit or any excess will be forfeited.

    The financial crash comes and my travel is greatly curtailed due to no work (I travel as part of my job.) And prices drop dramatically for flights.

    In the end I got a really nice agent who agreed to book home-San Fran, LA-home, home-east coast-and back home again all on one ticket (the fact that I came home in the middle of the trip is technically not allowed.) And even so, I ended up paying more for those tickets than I paid for my husband’s seat with me on all those flights because I bought his flights online. All those flights cost $10 more than my original home-Vancouver-home ticket.

    I think the sunk cost was the original trip. In order to get ‘best value’ for that flight, I ended up giving Air Canada a 10 month loan of $800 (and risked them going bankrupt in that time.)

  14. Brent says:

    I’m not so sure about your analysis here. this promotes a splurging mentality. Where everything is purchased on demand, but while always paying full price. Also it makes us hesitant to buy things with a long lead time. Our minds are fickle, but sometimes we have a decision made to prevent us from making poor decisions. Like buying a membership when you actually would use it at the membership price, but not when at normal price. Its just too easy to swing the other way if you are afraid to sink costs.

  15. Ryan P Smith says:

    I can’t imagine anyone not wanting to go to a Ranger’s game regardless of the circumstances…

    The idea of “recovering” sunk cost is certainly fascinating. Especially when there is competing sunk costs? When you go to the game you don’t stop paying for you cable tv, air conditioning etc.

    Thanks for the post, Trent.

  16. Andrew Weinberg says:

    A further step in the analysis would be to determine how robust the options are for whatever object you have paid for. In the case of the Rangers tickets, you could probably sell them to a friend or neighbor for less than face value and still recover most of the cost (or simply give them away and gain the goodwill that comes with that). However, it may not be possible to sell other items (such as food at a restaurant, as one commenter observed) after you have sunk the cost. This may make it easier to justify sinking the cost if you know that you can recover some or all of that cost later.

  17. Hank says:

    The US Government should have applied the sunk cost fallacy before they pour any more money into GM. After $19 billion dollars in the first round, the government should just cut their losses before sinking more money into such a horribly run company.

  18. Dmahlin says:

    There are a number of dimensions to this: Health Club memberships, for example: People pay a big membership fee and then a monthly fee, go full bore for a month or two, then stop going… But they keep on paying month after month because they are thinking of the money they have already “invested” and they fool themselves into thinking that if they can just get back and go regularly again it will be worth it – that they will somehow redeem the money already spent. More often than not, they just keep throwing good money after bad month after month. Yes, I’ve been there!

    Here’s another: I’ve been an avid comic book reader/accumulator (I find the word accumulator to be much more accurate than collector) for years. Often, I (and legions of other addicts) will continue to buy comics in a particular series month after month, year after year, long after the enjoyment of that series has faded – but we cannot bear to break our streak. We tell ourselves that we have (there’s that word again)”invested” so much time and money, we need to see it through. BS! Pull the plug and walk away if it isn’t enriching your life!

    I am in that process to some extent right now, cutting way back on my monthly subs and selling big runs of comics on eBay for pennies on the dollar. “Making” money? Well, sort of… You couldn’t call it profit in any strict sense because I am getting back far less than I spent. But – the money I spent is a Sunk Cost! It’s long gone and I’ll never see it again. Might as well get what I can and clear the space in my house.

    Great post, as always, Trent!

  19. KC says:

    There is no frugal way to make it to all the ballparks. However I do try to combine trips if possible. I had to go to a professional meeting in Orlando, so I flew down a few days early and drove to Tampa and Miami to see games. I had to get a rental car anyway – so all I paid for was a few extra nights in the hotel. Did the same when I went to San Diego with my husband on business – drove up to LA for the Angels and Dodgers, too.

    My Dad and I take a lot of baseball trips and he usually pays. This year we are driving from NC to Pitt, then Cleveland, then Cincy and home. We did a driving trip of DC, Baltimore, and Philadelphia one year. If you an do a driving trip of several close parks it is actually quite reasonable – just go to one game at each park and then try to stay out of town at a hotel to cut costs.

  20. mike says:

    Not to mention its 100 DEGREES!

    Welcome to Texas!

  21. “What’s the take home message? Always make the best decision now. Don’t let yourself be swayed by money you’ve already spent and can’t get back. Instead, avoid that trap when you can.”

    I always tell my readers that when it’s time to make a decision regarding an options (or any) trade, the goal is to make the best possible decision at the time the decision must be made – and if it turns out not to be the winning decision, don’t be concerned. The ability to make good decisions is a skill that is handsomely rewarded over time.

  22. mgroves says:

    Well, it’s not completely sunk, because you could probably sell those tickets to recover some of your costs.

    However, “it doesn’t actually make any sense to choose the less enjoyable option” is a very concise explanation, I like it.

  23. Beth says:

    Very true! I used to have this problem with clothing. I’d buy something fabulous hoping to find something else to match it. I’d end up with clothes in my closet I wasn’t wearing because I needed to buy something to go with them.

    Now I either budget to buy matching items together, or I don’t buy anything that doesn’t go with the classic pieces I already have. Any items that required an additional purchase found a new home instead of me spending more money on them.

  24. David says:

    The Texas Rangers are our favorite team. This isn’t because we’re from Dallas but because we live in Oklahoma City. We’ve had their AAA team (Oklahoma Redhawks) for years and have seen their prospects roll through here for years. Ruben Sierra. Steve Buechele. Kevin Brown. Sammy Sosa. And on and on. The Ballpark is a great place to see a game and a lot of fun. We go down several times a year and always collect about 50 of their great clear beer cups after the game is over.

  25. Graham says:

    An excellent and well written article, which applies well to pre-paid accommodation.

    Some years ago I booked a couple of nights at a 4 star hotel for a treat, and got a great discount by paying in advance on the internet. Unfortunately it turned out to be unsuitable after one night, and there would be no refund if I left early. Apparently I’d agreed to “no refunds under any circumstances” when booking.

    I could have stayed on because I’d already paid for it, which would have made things worse, but chose instead to accept the loss and move to somewhere decent. After all, holidays are meant to be enjoyed.

    I did get some value from the experience – it taught me to be extremely wary of paying in advance for something I might not be able to (or want to) use. On reflection, this lesson was probably worth what it cost me to learn it.

  26. Brian says:

    The other option in regards to tickets is working to buy them to save money. Just because the ticket is $15 at the door and $12 in advance doesn’t mean you can’t get it cheaper. If you stand outside the venue and its a GA show you are bound to find someone that had a friend that didn’t make it. most likely you are going to be able to buy a ticket for $5 or $10. I have had numerous tickets just given to me if I’m willing to go in with them and they know I’m not just trying to resell the ticket. Larger concerts that are general admission or if you desire nothing more than a lawn ticket should almost never be bought in advance unless there is a sale such as $35 lawn tickets for $10. Think if there are going to be 40,000 or even 20,000 at a place there are bound to be lots of people who bought one for a friend who ended up not going. Most of them are willing to take anything they can get for the ticket and you should be able to get 50%-75% off. Hit up craigslist for baseball tickets. There are always season ticket holder looking to get anything back on a ticket they paid for months ago. There are also tons of brokers on craigslist who are willing to take even 50% of the price just to get anything back also so don’t hesitate to purchase from them if you are getting a good price.

  27. Dan says:

    I didn’t see you mention anything about retention value. Those tickets could be resold for close to face value…or sometimes more. In Cleveland, we have season tickets to the Cavaliers, and ALWAYS recoup any sunk costs as long as the Cavs make it to the playoffs.

  28. Nick Thacker says:

    Haha, great post! This was like a refresher course in Microeconomics–sunk costs, “is it worth it” scenarios, etc.

    The problem, of course, is that while I understand the concepts, I still suffer from the “sunk cost” fallacy…

    Got me thinking about it though–I’m going to try and put these tips to action!

  29. In “The Dip” Seth Grodin states that sunk costs are sunk and should never be a reason to persist in a dead-end situation. I am concerned about your post because you make a statement regarding down payments that is just plain wrong. I am sorry but it is true. First, as a matter of principle and philosophy, you don’t sacrifice liquidity and increase opportunity costs by putting money down on a depreciating asset like a car in order to avoid gap insurance. Second, a large down payment on a home, doesn’t do anything but protect the bank, by decreasing their cash out of pocket while the consumer sacrifices liquidity. There is a smarter and more intelligent way to use that down payment to benefit the consumer and save thousands over the long haul.
    I am pinning an article now and will send it over so that you can take a look at it.

  30. Craig says:

    @Robin Crickman You could also purchase vacation insurance. USAA has this and it’s relatively low cost. I went on a cruise and insurance was $30/person and would refund the vacation for a wide variety of reasons. Just make sure you read the fine print.

  31. Ramona says:

    And oh ya, the Blue Jays triumph!

  32. PJA says:

    Or you could give the tickets away that evening to a church with a family in need. They get a fun night out and you get a tax write off.

  33. CBus says:

    I’ll bet I can sell a dollar bill for more than a dollar!

    One of the greatest examples of this is the dollar auction (http://en.wikipedia.org/wiki/Dollar_auction).

    Pretend that I am auctioning off an ordinary dollar bill. The dollar will go to the highest bidder, but the second-highest bidder must also pay his or her bid. After only a short time, one bidder reaches 99 cents, and the other 98. At this point, both realize that one of them will lose at least 98 cents, or both will pay more than a dollar for the dollar. The sunk-cost fallacy (and humans’ competitive desire to win) drive the price up above $1.

  34. This is an outstanding article on a subject most of us never think about! We tend to pay in advance or sign up for a program convincing ourselves that we’re saving money doing so. We also tend to believe that the only reason such “deals” are offered are for our convenience.

    On the flip side it should be more obvious. The fact that so many vendors want us to pay in advance, or to sign up for a discount plan of some sort should scream “You’ll Pay More!”. After all, the entire reason anyone wants us to pay upfront is so that they can lock in (higher) revenue. Why else would they bother with the additional paper work and record keeping?

  35. Lynn says:

    I actually enjoyed this entry Trent, thank you.

  36. Oliver says:

    A good way to avoid the investing sunk cost problem is to do the following:

    Say you had $5000 of GM stock a couple of weeks ago – that stock had probably taken a pounding since you bought it. Many people would try to ride it out for the reasons listed in the article but a good way to avoid that is to ask: “What would I do if I had $5000 in cash? Would I buy GM stock?” Almost certainly the answer would be a resounding “NO!”.

    Your investments are (very likely) fungible and so you should think about them like their cash equivalent and ask yourself how you would invest that cash amount.

  37. a conscience life says:

    It seems like ‘sunk’ cost is really just a gamble (mostly educated).

    It is not entirely dissimilar to the way that the stock market works. Buying things ahead of time gives you a better return on your investment (ie. it is cheaper to buy), but involves more risk (maybe you won’t even use it). On the other hand, buying at the door involves minimal risk (you are already there), but gives poorer return (costs more). At any rate, it seems like this is a general rule in the financial world — the more the risk, the better the possible financial outcome.

    With that in mind, it seems like most purchasing decisions, if we only consider the financial implications, could be reduced to a risk analysis. Thus, one would really just ask (i) would you be ok ‘losing’ this money and (ii) what are the odds of that happening. Then, if you go ahead and ‘sink the cost’ you will hopefully be ok with losing out on the payoff, since you have thought about it ahead of time.

    Upon reflection this seems somewhat similar to the approach suggested in “the paradox of choice.”

  38. Your friend at Target and Best Buy used the cash flow method of decision making– smart!

    As you rightly point out, some people get blinded and don’t think things through . . .

  39. Barbara Hodges says:

    I found this article quite practical. This is the first one I have read since registering. I hope the ones in the future as just as helpful.

  40. Cassandro says:

    Thanks for this post – I’ve had this “discussion” with my wife numerous times…so far to no avail. Maybe she’ll listen to you!

  41. Katie says:

    @Craig: You have to be a member of the military community in order to access USAA – they are great but exclusive! The rates are probably higher elsewhere.

  42. Bryan says:

    I’m trying to apply this sunk cost logic to my current career situation.
    I realize there is a sunk cost associated with the price I paid for earning my BS degree. Currently, I’m trying to decide if I should just stick with my degree field, even if I’m not entirely excited about it, or try to find something new and more fulfilling.
    You say, “It doesn’t actually make any sense for me to do the less enjoyable option”. But what about the potential extra educational costs I could face and the salary differences that could result from the decision. Maybe I’ve missed the point, or am trying to apply this sunk cost analysis to a situation where it doesn’t fit real well…

  43. Clayton says:

    I’ve done this with milkshakes.

    I get the large, and I’m getting positively ILL by the end, but feel a need to finish it. Because I’ve paid for it.

  44. That’s very true about the food. My mother-in-law gets frantic when there’s an extra hot dog left over after a barbecue. She feels it’s a waste, and invariably forces someone to finish it off. After an argument, of course. So rather than just throwing out the hot dog, someone is forced to overeat, to placate someone who doesn’t understand the concept of sunk costs.

    And kudos to your Rangers for letting the starters go past the 6th inning!

  45. rhymeswithlibrarian says:

    I do sometimes get the impression (in myself and in others) that the sunk cost fallacy is particularly difficult to shake where food is concerned. Besides our psychological drive to use something that we’ve paid for, we’re strongly socialized that wasting food is a sin and will do harm to people suffering from famine.

    I heard something very wise on this issue once:

    “The only good reasons to eat food are because it’s nutritious, it’s tasty, or you’re hungry. If you eat something just to avoid throwing it away, you’re still throwing it away, you’re just using your body as the garbage can.”

  46. Craig says:

    One factor you left out of the ballgame scenario is the extra costs you save. I live in western New York and have season tickets to the Buffalo Bills. Last year was my first year, and there a game came up that we couldn’t make it to, or sell the tickets to someone else. I did some math and realized it wasn’t a big deal to just not go. Our two seats were $70. We live an hour from the stadium, so we would have to spend about $20 on gas, $5 on tolls, and $15 to park. We would probably spend another $15 on food for tailgating, and then another $10-$20 for drinks/food in the stadium. When we go to the game, we are happy to pay these costs, but I realized that by not going we are losing our investment in the tickets that we already paid, but we are also saving $50-$70 in expenses to do something that we were too busy at the time to do.

    I struggled with the psychology of the choice, but as I’ve learned from many of your posts, the numbers helped to guide my judgment.

  47. Bill in Houston says:

    As a side note, I’ve found that buying over the web doesn’t get you cheaper baseball tickets. My wife and I go to Astros games a few times a year. I stopped buying over the web because the site adds surcharges to your purchase. What irks me is that this is the Astro’s official web site!

    I’m socked with a $4.50 per ticket “convenience charge” and an additional $2.50 charge to use my own printer to print out the tickets. So, I’m out an additional $11.50 just for the conveeeeeeenience of using that Internet thing.

    Well, forget that. My wife and I walk up to the window on the day of the game (not before finding out if the game is sold out, but with the Astros they never are anymore), and buy the same kind of seat.

    I find it shameful that I’m charged seven bucks for a burger, four bucks for fries, and eight bucks for a beer, so we stopped buying food at the ballpark (we eat before we go), but this surcharge is an outrageous ripoff.

    Then again, the whole “Astros experience” is getting to be a ripoff. When Drayton McLayne forced taxpayers to build his team a new stadium that seated 10,000 fewer people but had more luxury boxes, no parking lots were built. You pay between five (a mile away) and thirty bucks (next to the stadium) to park. The cheapest tickets are now 7 bucks (up from five last year). There’s the food, the program (can’t tell the game without a program), the gas to get there.

    Two people in the cheap seats without food can see a game for about $25 including gas. That’s us, maybe three times a year. Most families pay over a hundred.

    Sorry, rant over. I’m just steamed that all professional sports are no longer ABOUT sports.

  48. beth says:

    For better or for worse, I think this also explains why so many people have opted to walk out on their mortgage. Losing $50k on a house that used to be worth $200k and is now appraises @ $90k is much less painful than paying out the full $300k+ you would shell out over the life of the mortgage (all the while hoping that you *might* recoup some of that lost market value).

  49. Sunit says:

    One of my favourite posts so far! :)

  50. Nikki says:

    This is a good post, but what about situations where you can save money elsewhere because of the sunk cost? For instance, overdraft fees are my biggest problem that’s hard to deal with, even if they only happen once or twice in years. Does this even qualify as a sunk cost?

    But they just happened recently, about $120 worth. Is it irrational for me to skip going out for lunch, return unnecessary things that I bought, NOT go to the movies when I was going to, etc. to recoup losses? It won’t amount to the cost, but it makes me feel like I’m doing SOMETHING about it.

  51. cj says:

    Interesting that we are perceiving sunk costs in simple terms like tickets – sports/travel, etc.
    The real danger in “sunk costs” is in investments were walking away is not just an night but maybe months or years in an investment: house, stock options, jobs or even relationships. How many people stay in a house that no longer fits them emotionally and financially because of “we put so much into buying it, decorating it our way” etc when they are spending mortgage and maintenance to be unhappy. Or a relationship that they put alot of time into – the “after all we have been thru”
    Curious – how do you know when its about sticking it out and when its sinking/sunk

  52. Therese says:

    Some of the best accounting and life (!) advice I ever got came my college Cost Accounting professor: “Don’t cry over sunk costs.”

  53. Lise says:

    @Bryan #42: You say, “Maybe I’ve missed the point, or am trying to apply this sunk cost analysis to a situation where it doesn’t fit real well,” but actually, I think the fit is pretty good.

    Easy for me to say, I know, since I’m not the one facing the prospects of shelling out even more money and time for another degree. But you spend half of your waking hours at your job. If you’ve just finished your bachelor’s, you’re probably in your early 20′s and looking at forty more years of “not that excited”. Picture yourself having exactly this same internal conflict ten years from now, only by then you might have a house or kids and changing careers is not going to be all that easy…

    (However, maybe it’s not the field, just the specific job? Maybe you can start looking for a different job in the same field but involving more of the issues that matter to you or the kinds of things you like to do?)

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