Tuesday, May 09, 2006

Sunk Costs in Dating

Sunk costs are non-refundable expenditures made without influencing a final decision.

The example IH, an Economist, used to explain this to me was a fee paid to a travel agent. If you must pay a travel agent $100 to research a time sensitive vacation for you regardless of whether you decide to buy one of the packages she offers you, the $100 should be viewed as a sunk cost. If the travel agent finds a package for you that isn't to your exact time specifications, you should not make the decision to buy the package based on the fact that you already paid the $100. If you don't buy the package, you only experience suffering for loosing money. If you buy the package, you suffer in money and must go on a vacation you didn't want to go on- ie time lost.

Or when I get $25 off at Banana Republic for spending $500… which, according to my mother who pays the credit card bill, is way too often. It's usually only useable for a limited time and nothing I ever buy from Banana is less than $50. But, I feel the need to buy something because I have $25 off. The $25 is a sunk cost. I shouldn't go buy something because I have $25 off. If I need something and have made the decision to buy it, only then should the $25 be a benefit.

So why the hell am I blogging about sunk costs?

Because they are HUGE in relationships. My other coworker (not the S&A scholar), alerted me to how often I make my decisions based on sunk costs.

Money spent on dates should be viewed as a sunk cost. Actually, opening doors and dressing well and other superficial things should also be viewed as sunk costs. You shouldn't stay with someone or expect something from someone just because you paid for dinner or because they have good manners. Your decision to be with someone or not be with someone should be based on whether or not you could see yourself with them as a person.

As far as money goes, take the horrible date I had with a complete a-hole back when I first got to DC. He was a friend of an acquaintance. The conversation was obviously going nowhere. He was aggressive and obnoxious, and the fact that I found him hot couldn't make me attracted to him. I had a full glass of expensive wine in front of me. So, as the conversation dwindled into uncomfortable silence, I stated, "After this drink, we can go on our separate ways." Yeah, it was probably a blow to the guy's ego, but seriously, he sucked. Then he said, "You can leave now." And I responded that I'd like to finish the drink for which I intended to pay… he replied, "Fine then, I'll leave." And proceeded to go up to the bar to pay. I dropped $10 on the table and walked out (I didn't want him to tell our mutual connection that I was bitchy and left him with the tab)… something I should have done the minute he said, "You can leave now." The price of the drink shouldn't have influenced my decision to stay in the company of such a supreme piece of crap. Even for one second.

Or, say APK and I stop wanting to be with each other (not that we do), the cost of his plane ticket to Mobile for Memorial Day shouldn't influence our decision to stick it out and continue dating. I bought the ticket when I thought I wanted him to go to Mobile. If things weren't working out with us, I shouldn't waste either of our time (or my parents' time) by bringing him home with me just because we bought a plane ticket. Not that I plan on breaking up with APK, I'm just saying.

A sunk cost also applies to more complicated matters in relationships. Pretend you are dating someone that you're not that into and want to break it off. Now say your circles are intertwined via kickball. Just because you have to see each other at kickball games doesn't mean you should stick out dating until kickball is over to make things less awkward. In this situation, a little bit of awkwardness is the sunk cost. The cost of staying together unhappily and possibly not having as much fun as you would once the awkwardness past is much more irrational than just breaking up when you want to break up.
So that's economics as it relates to dating. What do you think?

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