Frank offers the following scenario:
Suppose you’re about to depart for a sporting event or concert at an arena 50 miles away when an unexpected heavy snowstorm begins. If your ticket is nonrefundable, your decision whether or not to drive to the event should not be influenced by the amount you paid for it.
Yet a fan who paid $100 for his ticket is significantly more likely to make the dangerous drive than an equally avid fan who happened to receive his ticket for free.
The first fan is probably guilty of a cognitive error.
Now Frank defines behavioral economics as an “intersection of economics and psychology.” Well, let us psychologize a bit. Why would one be tempted to drive? I suggest that if he failed to drive, then he’d have to issue a judgment of himself as a loser. He is a dupe, a sucker, a sap who was so imprudent that he failed to do something so simple as to check the weather forecast. The worst part is not that he lost $100 but that he was stupid enough to do this. The self-condemnation is what stings.
Furthermore, driving in a snowstorm entails only a heightened probability of an accident. A risk preferrer may have the temperament of an impulsive and confident Artisan and decide to go anyway. The assumption of temperamental equality has to be made in addition to the assumption of equal enjoyment of the event.
I agree, however, that considering the sunk cost is an error. To continue with our psychology, a person who decided to drive may after a few minutes be thinking to himself: “I can’t see a thing! The road is awful. If I get there alive, it’ll be a miracle. I’m so dumb, I should’ve stayed home; forget this stupid ticket.” It is true that he may regret the decision.