WP: The Compromise Effect
Psychologists Amos Tversky and Daniel Kahneman of Princeton University explored a situation in an oft-cited experiment involving a theater ticket back in 1984. They told one group of subjects to imagine that they have arrived at the theater only to discover that they have lost their ticket. Would you pay another $10 to buy another ticket? they asked. A second group were asked to imagine that they are going to the play but haven’t bought a ticket in advance. Then, when they arrive at the theater, they realize they have lost a $10 bill. Would they still buy a ticket?
In both cases, the subjects were presented with essentially the same simple question: Would you want to spend $10 to see the play? That’s largely the way the cash-losing group thought of it, with 88 percent opting to buy the ticket. But the ticket losers, focusing on sunk costs, tended to frame the question in a different way: Am I willing to spend $20 to see a $10 play? Only 46 percent said yes.
HIGHLY interesting article. I am one who buys expensive car insurance…maybe I should reconsider? 🙂
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NYT: In Another Big Bankruptcy, a Fiber Optic Venture Fails
Global Crossing has never reported an annual profit since it was created in an ambitious plan to extend its sole resource Û a fiber optic cable traversing the Atlantic Ocean Û into a 100,000-mile network connecting 27 countries in the Americas, Europe and Asia. The company has $22.4 billion in assets and $12.4 billion in debt, making its filing the largest bankruptcy by a telecommunications company. It is almost half the size of Enron, the largest bankruptcy filing of any kind in United States.