There are reasons to do things that look like honoring sunk costs. The most common example, that I have seen mentioned in almost every discussion I have read on sunk costs, is reputation—if doing what you had planned, rather than what you would currently prefer would have negative future reputational costs, then it is still rational to do it, even though you would now prefer not to.
The second reason is one that occured to me while reading your post—sometimes I regret not doing something I had planned, because I didn’t feel it was the best use of my time when it came up. So, if you felt motivated enough to buy the ticket in the first place, then it may still be rational to use it, despite how you feel at the time, if you think you may later regret not using it.
Notice neither of these is actually honoring sunk costs. In both cases, you do what you had planned despite changing your mind about how desirable you think it would be in order to avoid future problems—reputational or regrets.
They also give an excellent way of re-framing the issue when arguing against honoring sunk costs: explain your position as “not forsaking a project or enterprise, but, rather, wisely refusing ‘to throw good money after bad’” [42].
One other reason for honoring the sunk cost that I haven’t seen mentioned is that it might much more strongly motivate you to improve your decision making in the future, thereby preventing many future costly mistakes. Again though, that’s not really a case of honoring sunk costs, since staying at the movie turns out to be a net win, just not for the obvious reasons.
One other reason for honoring the sunk cost that I haven’t seen mentioned is that it might much more strongly motivate you to improve your decision making in the future, thereby preventing many future costly mistakes.
I find myself doubtful of this as empirical psychology. Actually abandoning your course in midstream feels so much more painful—though only for a moment, not in the long run—and more importantly involves so much more of an acknowledgment of error and the initial action as being the key mistake, that I would think the activity substantially less likely to be repeated.
I was thinking of situations when abandoning course is what you want to do, because it allows you to “cut your losses” and avoid the unpleasantness to follow. Staying the course in that sort of situation would be a form of self-punishment, done with full acknowledgment of the mistakes you made.
Sometimes a strong, harsh lesson is a better instructor than many small, mildly unpleasant lessons.
EDIT: I guess nobody here agrees that sitting through a bad movie unnecessarily might be more unpleasant than leaving immediately but having wasted $10. Or is it that you disagree that imposing the punishment that honors the sunk cost could ever be more effective than the strategy of abandonment? If you can abandon strategy at any point from conception to completion, you can abandon when sunk cost is low or nonexistent and costs to be beared still are very high, or sunk cost is high and still to bear is low, or anywhere in between, including something like 25% sunk/75% unsunk, when 25% might not make much of an impression on you and thus won’t change your behavior but 75% would make a sufficiently stronger impression that the behavior is changed.
That was one of the places I have seen it. “Rational Choice in an Uncertain World” is an excellent text; it also has the benefit of being very readable, so it’s good as a quick refresher for when you are doing more in depth study.
There are reasons to do things that look like honoring sunk costs. The most common example, that I have seen mentioned in almost every discussion I have read on sunk costs, is reputation—if doing what you had planned, rather than what you would currently prefer would have negative future reputational costs, then it is still rational to do it, even though you would now prefer not to.
The second reason is one that occured to me while reading your post—sometimes I regret not doing something I had planned, because I didn’t feel it was the best use of my time when it came up. So, if you felt motivated enough to buy the ticket in the first place, then it may still be rational to use it, despite how you feel at the time, if you think you may later regret not using it.
Notice neither of these is actually honoring sunk costs. In both cases, you do what you had planned despite changing your mind about how desirable you think it would be in order to avoid future problems—reputational or regrets.
There is a very nice discussion of the sunk cost fallacy in Rational Choice in an Uncertain World: The Psychology of Judgement and Decision Making. They make your first point there.
They also give an excellent way of re-framing the issue when arguing against honoring sunk costs: explain your position as “not forsaking a project or enterprise, but, rather, wisely refusing ‘to throw good money after bad’” [42].
One other reason for honoring the sunk cost that I haven’t seen mentioned is that it might much more strongly motivate you to improve your decision making in the future, thereby preventing many future costly mistakes. Again though, that’s not really a case of honoring sunk costs, since staying at the movie turns out to be a net win, just not for the obvious reasons.
I find myself doubtful of this as empirical psychology. Actually abandoning your course in midstream feels so much more painful—though only for a moment, not in the long run—and more importantly involves so much more of an acknowledgment of error and the initial action as being the key mistake, that I would think the activity substantially less likely to be repeated.
I was thinking of situations when abandoning course is what you want to do, because it allows you to “cut your losses” and avoid the unpleasantness to follow. Staying the course in that sort of situation would be a form of self-punishment, done with full acknowledgment of the mistakes you made.
Sometimes a strong, harsh lesson is a better instructor than many small, mildly unpleasant lessons.
EDIT: I guess nobody here agrees that sitting through a bad movie unnecessarily might be more unpleasant than leaving immediately but having wasted $10. Or is it that you disagree that imposing the punishment that honors the sunk cost could ever be more effective than the strategy of abandonment? If you can abandon strategy at any point from conception to completion, you can abandon when sunk cost is low or nonexistent and costs to be beared still are very high, or sunk cost is high and still to bear is low, or anywhere in between, including something like 25% sunk/75% unsunk, when 25% might not make much of an impression on you and thus won’t change your behavior but 75% would make a sufficiently stronger impression that the behavior is changed.
That was one of the places I have seen it. “Rational Choice in an Uncertain World” is an excellent text; it also has the benefit of being very readable, so it’s good as a quick refresher for when you are doing more in depth study.