Sunk Costs are Sunk: An Application to a Starbuck's Run
By David Henderson
Last month I wrote the following in a blog post:
Most mornings that I don’t teach, I go out early to the local Safeway, where there’s a Starbuck’s, and get my wife a Grande non-fat latte. Tip to men who want a long-term successful marriage: If there are things you can do that have a low cost to you and a large benefit to your spouse, do them.
I did the same thing this morning. Ever since our time in Italy in 2006, my wife has liked her coffee strong. So she gets a quad latte, half-decaf, half-regular with half an inch of room (the latter so as to concentrate the coffee.) Normally, I will taste the coffee to make sure they got it right. They almost always do. This morning, I neglected to taste it. When I brought it home, my wife started sipping it and looked immediately disappointed. It was weak. I tasted it too and, sure enough, it was weak.
I offered to go to the Starbuck’s again. The round trip, if there’s not a big line, takes 15 minutes. My wife said no, but I could see her disappointment. So I went, got her a new cup, tasted it, found it to my (her) liking, and brought it home. It took just under 15 minutes.
Why do I tell this story? Not (or not mainly) so that I can look like a hero. Mainly because on the way back I realized that this is a great application of sunk cost.
Think about it. I decided years ago that that 15-minute (and sometimes 20-minute) errand is worth it to me for the pleasure my wife gets out of it. MB > MC. (Marginal Benefit is greater than Marginal Cost.) The first trip today didn’t work. But that’s a sunk cost. I can’t get that time back no matter what I do. That cost doesn’t fold into the cost of getting coffee again. It’s gone. Thus the new MC of getting the coffee is the same as the old MC. (The only way it wouldn’t be is if my cost is higher a few minutes later. If it were a morning I was teaching or prepping for a meeting, it well could be. But this morning, all I’m doing is blogging and grading a final exam.) The MB is the same. Therefore MB > MC for this second trip.