Choiceology with Katy Milkman | S17 EP2
When Sunk Costs Take Flight
Have you ever bought a pair of shoes that never really fit, but you kept wearing them in hopes you'd break them in? All because you didn't want to feel your money had gone to waste—even as you felt blisters forming?
In this episode of Choiceology with Katy Milkman, we explore how focusing on past, irrecoverable costs can skew our judgment and future commitments.
Bill Kolb takes us inside the Evergreen Aviation & Space Museum in McMinnville, Oregon. He shares the story of "The Spruce Goose" seaplane and why its creator, Howard Hughes, was so committed to the project despite many challenges and several opportunities to back out.
Next, Katy speaks with Richard Thaler, economics Nobel laureate and Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago Booth School of Business. Thaler reveals why we tend to dwell on sunk costs that cannot be recovered and shares insights from his updated book The Winner's Curse: Behavioral Economics Anomalies, Then and Now.
Check out the additional papers mentioned in this episode: "Paying Not to Go to the Gym" by Ulrike Malmendier and Stefano DellaVigna and "The Realization Effect: Risk-Taking After Realized Versus Paper Losses" by Alex Imas.
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