Rational: I watch baseball, because I enjoy baseball.
Opportunity cost: What else could I be doing right now?
Optimization: Is the marginal utility of continuing this activity greater than the marginal utility from another activity?
Sunk Cost: I am committed to seeing this activity through to the end.
Consideration of future: Will my team make it back to the World Series in my lifetime? (I am a Mariners fan, so the "back to" is a bad assumption). Will I miss a once in a lifetime happening that I can never see live again?
Experience good: My relative enjoyment of this baseball game is partially based on my past enjoyment of baseball games.
Oligopoly: Playoff teams control more of the baseball market
Game theory: The choices of the other manager, coaches, and players are dependent on the choices of the other teams economic agents.
Other concepts: Random walk, asymmetric information, zero sum game
Common examples often involve situations where the total cost is unknowable or the desired outcome is no longer possible -- staying in a failing long term relationship, continuing to fund a failing project, standing in a long slowly-moving line. The sunk cost fallacy certainly applies.
But I think in many other popular examples where the total cost is fixed or known -- completing a degree program, finishing a marathon, watching a bad movie to the end -- it's actually a rational reframing of the remaining marginal cost by subtracting the sunk cost from the total. It's less "I should finish my degree because I'm already 3½ years in" but rather "for the marginal cost of 1 semester I can get a degree". Even when the objective has lost some luster, the much smaller marginal cost may make the decision to continue worthwhile.
Rational: I watch baseball, because I enjoy baseball.
Opportunity cost: What else could I be doing right now?
Optimization: Is the marginal utility of continuing this activity greater than the marginal utility from another activity?
Sunk Cost: I am committed to seeing this activity through to the end.
Consideration of future: Will my team make it back to the World Series in my lifetime? (I am a Mariners fan, so the "back to" is a bad assumption). Will I miss a once in a lifetime happening that I can never see live again?
Experience good: My relative enjoyment of this baseball game is partially based on my past enjoyment of baseball games.
Oligopoly: Playoff teams control more of the baseball market
Game theory: The choices of the other manager, coaches, and players are dependent on the choices of the other teams economic agents.
Other concepts: Random walk, asymmetric information, zero sum game
And this is why sports economics is such a fun class to teach!
Common examples often involve situations where the total cost is unknowable or the desired outcome is no longer possible -- staying in a failing long term relationship, continuing to fund a failing project, standing in a long slowly-moving line. The sunk cost fallacy certainly applies.
But I think in many other popular examples where the total cost is fixed or known -- completing a degree program, finishing a marathon, watching a bad movie to the end -- it's actually a rational reframing of the remaining marginal cost by subtracting the sunk cost from the total. It's less "I should finish my degree because I'm already 3½ years in" but rather "for the marginal cost of 1 semester I can get a degree". Even when the objective has lost some luster, the much smaller marginal cost may make the decision to continue worthwhile.