$200 question

Discussion in 'Psychology' started by james_bond_3rd, Nov 8, 2005.

Are $200 concert ticket and $200 phone card equivalent?

  1. Yes

    6 vote(s)
  2. Concert ticket worths more

    11 vote(s)
  3. Phone card worths more

    5 vote(s)
  4. Depends on which one expires first

    4 vote(s)
  1. someones been reading their trading psychology book :)
    #11     Nov 10, 2005
  2. In the example in the original post, we are talking about one particular person paying the same $ amount for each of two items ($200 for a concert ticket and $200 for a phone card) but this person is willing to replace only one of them if it gets lost but not the other -- i.e., irrational logic.

    if the concert ticket is not worth $200 (to this person), why did he/she pay $200 for it in the first place?

    In each of the situations (losing the concert ticket or losing the phone card) the person is out $200. However, in the first case (losing the concert ticket), the person may now "feel" that he/she will be spending $400 for the concert if end up buying another ticket. Whereas the person wouldn't think twice about replacing the phone card.

    It is interesting to think about this ... may also be relevant in trading.. there is a parallel .....sometimes we may feel that a loss has to be recovered in the same market/stock etc. but the truth is it doesn't matter (you don't have to go back at the same stock or market to get back lost $$ i.e., trying to beat what beat you) those are emotional reactions/tendancies.. not rational. You are better off forgeting the loss altogether and focusing on the next potential winning trade going forward...

    Good trading!
    #12     Nov 10, 2005
  3. Joe


    Price and value are two different things...
    #13     Nov 10, 2005
  4. c_323_h


    I remember reading about this is a behavioral finance book. As I recall, they're both the same, it's just how the situation is framed in context. Correct me if I'm wrong.
    #14     Nov 11, 2005
  5. c_323_h


    Now I remember, I think it was called the sunk cost fallacy AKA the Concorde fallacy.
    #15     Nov 11, 2005