The rainy concert

About this video

Weeks ago you paid for a concert ticket. Tonight it is pouring with rain, you are tired, and you would really rather stay at home. The ticket can't be sold or given back. Many people say: I paid for it, so I have to go, or the money is wasted. It feels sensible. But the money is gone whether you go or not. Staying at home won't bring it back, and going won't either. The only question left is which evening you would enjoy more from now on.

Hal Arkes and Catherine Blumer (1985) asked students to imagine paying 100 dollars for one ski trip and 50 dollars for another, then finding they were on the same weekend. Neither ticket could be sold, and the 50-dollar trip was the one they expected to enjoy more. Just over half chose the 100-dollar trip anyway. The researchers also tried it for real: a theatre sold season tickets, some at full price and some, by chance, at a discount. In the first half of the season, the people who had paid full price went to more plays.

Money, time or effort that has already been spent and can't be got back is a sunk cost, like a ship that has sunk to the bottom of the sea. Letting it push you into a choice you wouldn't otherwise make is the sunk cost trap. We fall into it because "don't waste things" is usually a good rule, because walking away feels like accepting a loss, and because we don't like to feel our first choice was a mistake.

The habit that helps: imagine you got it for free. If someone had given you the ticket, would you go out in the rain tonight? Whatever you answer is your real choice. A friend waiting for you is a real reason to go; "I paid" is not. This video explains sunk costs on Knaph.

Transcript

1. 0:00You paid for this ticket weeks ago. Tonight it's pouring, and you're tired. Do you go?
2. 0:06I paid, so I have to go. But the money's gone either way.
3. 0:13Two ski trips, one weekend. Just over half chose the dearer one, not the more fun one.
4. 0:20At a theatre, people who'd paid full price went to more plays.
5. 0:26What's spent and can't come back is a sunk cost. Only the future counts.
6. 0:32Imagine you got it for free. Would you still go?
7. 0:38What's spent is gone. Choose by what lies ahead.