Miscellaneous desk
< September 12	<< Aug \| September \| Oct >>	September 14 >

Welcome to the Wikipedia Miscellaneous Reference Desk Archives
The page you are currently viewing is a transcluded archive page. While you can leave answers for any questions shown below, please ask new questions on one of the current reference desk pages.

September 13

Reverse sunk cost fallacy?

I wonder whether I an experiencing a sort of reverse sunk cost fallacy. A while a go I bought a very cheap car for my daughter to practice driving while learning and hopefully for the first year when insurance on all but lowest insurance groups is expensive. I spent X on the purchase and then another 10% on new tyres, which I thought was reasonable if it lasted 6 months and good if it lasts a year. Six months on it is due for an MOT (UK vehicle test), and needs almost X spent on it again to pass. I have a feeling "I will have spent 2X on this car and that's a lot for an old car, perhaps its time to look for a newer one. Logically though if I were in a position now when someone offered me a repaired car with newish tyres and a 12 month MOT for price X i'd think it a very good deal. Am I experiencing a reverse Sunk cost fallacy? I can't get over the strong feeling that I shouldn't get the car repaired even though logically it seems like a good deal-- Q Chris (talk) 11:33, 13 September 2018 (UTC)[reply]

Can you find a newer and hopefully better car with a 12 month MOT for less than 2X in six months? Otherwise I would get this one repaired. 194.174.73.80 (talk) 12:38, 13 September 2018 (UTC) Marco Pagliero Berlin[reply]

And that is an example of what I think is the reverse sunk cost fallacy. The actual test would be "Can you find a newer and hopefully better car with a 12 month MOT for less than X", the first "X + 10%" is already sunk! -- Q Chris (talk) 12:42, 13 September 2018 (UTC)[reply]

So there would be 3 possible situations?

1. Sunk cost is included to bias in favour of investing more in the current state (sunk cost fallacy)

2. Future costs estimates are the only cost input into the decision (pure rational)

3. Sunk cost is included to bias against investing more in the current state (reverse sunk cost fallacy)

I'd say, Q Chris, that you are making sense, if that is what you mean. Not sure if it has been studied by academics in psychology, like the sunk cost fallacy has, though. --Lgriot (talk) 14:48, 13 September 2018 (UTC)[reply]

You are right, the test should be "less than X" and not "less than 2X": if I only can find another car for e.g. 1.5X but not less, I should probably keep the old one. Except the newer car is so much better that I can anticipate it will spare me much trouble in comparison with the older car. On the other hand: the old car I know well while with the new one I risk some hidden quirks will make me curse the day we met. In this case the new car should cost substantially less than X (Another case of half full vs. half empty?). 194.174.73.80 (talk) 14:08, 14 September 2018 (UTC) Marco Pagliero Berlin[reply]

Q Chris, consider that most cars need X spent on them on a regular basis. If they're old and cheap, it's for an MOT fixup/bribery (depending on your country of residence). If they're old and expensive, it's for extra expensive parts as part of regular maintenance (or worse, if it's in the "old and cheap" car's shape), and if they're new/ish you might not be spending much, but that could be one way to think about the cost of depreciation, and it will come to bite you back in your rear if you skimp on little things like transmission oil, like many people do. If you know what parts are the most likely future money sinks, that the car has never crumpled any crumple zones, and that your daughter likes the car, keep it. 93.136.126.233 (talk) 19:35, 22 September 2018 (UTC)[reply]

The general fallacy here is that people think "A 20k car costs me X per year, so a 1k car should cost me not a lot more than X/20". They fail to realize how much of the cost of car ownership doesn't scale with the car's value. I'm not sure what that fallacy is called. 93.136.126.233 (talk) 19:37, 22 September 2018 (UTC)[reply]