Title: The Sunk Cost Fallacy – You Are Not So Smart
Headings: You Are Not So Smart
You Are Not So Smart
The Sunk Cost Fallacy
You Are Not So Smart – The Book
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Content: It was a fine deal considering the quality differences and the normal prices of both items. Ariely then set up another booth with the same two choices but lowered the price by one cent each, thus making the kisses cost nothing and the truffles cost 14 cents each. This time, the vast majority of people selected the kisses instead of the truffles. If people acted on pure mathematical logic, explained Ariely, there should have been no change in the behavior of the subjects. The price difference was the same. But you don’t think in that way. Your loss aversion system is always vigilant, waiting on standby to keep you from giving up more than you can afford to spare, so you calculate the balance between cost and reward whenever possible. He speculates that this is why you accumulate free tchotchkes you don’t really want or need and why you find it so tempting to accept shady deals if they include free gifts or choose decent services that offer free shipping over better services that do not. When anything is offered free of charge, Ariely believes your loss aversion system remains inactive. Without it, you don’t weigh the pros and cons with as much attention to detail as you would if you had to factor in potential losses.