So in arguing with my parents on various occasions and finally turning to the internet for support I discovered that I had been debating for an important economic principle, that is I was debating the idea of sunk costs.
Basically a sunk cost is when you have already spent money on something and have the idea in your head that you have to see whatever you've spent on through or else you've wasted your money. This is fundamentally wrong, why? Because the money is already gone, it's sunk.
Take a real world example: You buy a ticket to a professional soccer game for $50 but on the day of the game it's cold, rainy, and windy outside; and on top of that your just getting over and there's a roaring fire in your living room. Should you go the game because you've already spent the money or should you stay home where you will enjoy yourself more? The intelligent answer would be to stay home, the money is gone and nothing can change that so it's smarter to spend the night at home where you will enjoy yourself than to go the game and feel miserable.
So for debate how do you feel about this; do you agree or disagree?
I understand where you are coming from, but wouldn't you also want to get what you paid for? Say you went golfing and paid for 18 holes, but it was hot outside. Would you stop on the 5th hole and go home? In this economy, in my opinion, it is better to get your money's worth
In this economy, in my opinion, it is better to get your money's worth
Basically do you want to be miserable because you paid for something or feel good but not get what you paid for. As I said, a lot, the money is gone it isn't coming back.
Let's use a recent corporate example: The Microsoft Kin was recently released; it sold 10,000 units and is being pulled from production. It made much less than was put into it because of various corporate problems but Microsoft could have realized it wasn't going to sell and stopped production even if they already spent money on it. They decided to continue throwing their money away because they didn't want to lose "their investment" in the Kin.
Well ... it all depends on the situation ... for something big like that, then sure, pull the plug. But if its something that you spent your hard earned money on, it shouldn't be wasted ... frugally speaking ... but if u have the resources to waste ... then why not
Don't listen to Snazzy. He doesn't know what he's talking about. Since I didn't take Macro Economics yet, I don't exactly know everything about economics, but I have an understanding about the general idea. This is more of Micro Economics, since it doesn't have to do with the economy, but more about small business and money management.
Basically, you pay to be miserable. I don't think that is smart at all. There is no real room for debate. You don't really need to know anything at all.
Snazzy, paying for something that is worthless is idiotic. Why would I pay ten bucks for a rock? Once what you bought loses its value, then it is essentially like buying a rock. It's idiotic.
$50 for a match may be something someone spent a while saving up for, or it's pocket change to someone else. People have a tendency to spend unwisely--I'm guilty of this--because we're out to please ourselves with entertainment, socialisation, and instant gratification. In the long run, whether the match had great weather or horrible torrential down pours, couldn't it be considered a 'sunk cost' regardless?
The other thing to consider is this: people often budget for entertainment. Perhaps this person allows $100 a month for eating out, seeing a movie, going to a sporting event, etc. My dad taught me that early on--that it's important to allow yourself those freedoms, and some pie, to maintain a degree of sanity. However, whether or not the person goes based on uncontrollable conditions is up to them. If they budgeted for it, are not over their budget, but would feel like they wasted it, is it still a sunk cost?
Guilt, I agree, plays into it. And I would want my money's worth as well. However, consequences of doing/not doing are different to different people. That is where the economic model suffers a bit. What may be a serious consideration for one person may be a molehill to another. That is hard to measure.
There really is not an answer to your question. When you are buying futures, you are always assuming something.
For instance, when you first payed 50 bucks for the soccer ticket, you were assuming the game would be played out in the sun, and would be enjoyable to watch.
But the day of the game, it was raining. So you were wrong. Now, you're assuming that staying home will be more pleasurable than the soccer game. While it may be true that your home is LIKELY to have some level of comfort, this is not necesarily true. Furthermore, it is not necesarily true that the soccer game won't be entertaining.
For one thing, there is a much higher chance of something historic happening at the soccer game than at your house. Additionally, if something historic does happen, the rain will only enhance it. You can tell all your friends later "I was there. It was pouring rain, and most of the fans had already left, but I stuck it out. And I was there."
This is a story that you can tell for the rest of your life. Whereas if you had stayed at home, you would be comfortable, but regretful.
So it all comes down to this: Home= high chance of moderate comfort, no chance of glory Game= low chance of glory, no chance of comfort
So which is worth 50 bucks? Certain moderate comfort or a chance at glory?
