What's the phrase that describes a willingness to spend extra cash in a way that you wouldn't otherwise, because you're already spending a lot?
I thought this was "The Fallacy of Large Numbers", but that actually has to do with probability. A good example of this would be if you buy a $50,000 car and they offer an option for an automatic garage door opener for another $300, and you think "Oh, what's another $300 -- I'm already spending $50k!", when you would never pay that much for a auto-garage-opener to be installed in your old car. The $300 is still worth $300, regardless of the other money that you're spending. It's not worth less because it's in addition to an even larger amount.
Answers ( 3 )
This sounds to me like the Sunk Cost fallacy. People commonly refer to behavior resulting from this fallacy as “throwing good money after bad.”
It is a specific subcategory of Escalation of Commitment, a behavior pattern where negative outcomes are ignored and the behavior is continued.
But it is the Fallacy of Large Numbers: it is based on the probability you will not need that extra $300.00, either.
Your decision to spend $50,000 on a car is already gamble, and one you are sure you can win: Not only will you will get FIFTY THOUSAND DOLLARS worth of pleasure out of the deal, you will not need that money during that whole time, and you can easily make or get your hands on fifty thousand more if you do need it. What is the probability against that?
Not much- except for getting fifty thousand dollars of pleasure out of it, but putting a price on pleasure is always a personalized crap shoot. If it turns out to be a lemon despite your careful research, well, then it's time to do the awful algebra on personal pleasure.
There is also the idea "Penny wise, pound foolish", or in this case, its opposite: "Pound foolish, penny wise" You rationalize your decision to spend tens of thousands to be okay, but need to convince yourself to spend a couple hundred because in reality, I think this is about the personal gamble you can 'afford' fifty-kay for a car, but somewhere inside, you know that is purely extravagant, and so you wonder about the few hundred.
Decision-making processes of the brain are stunningly interesting- if you are into that stuff:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4668873/
https://www.healthimaging.com/topics/diagnostic-imaging/fmri-reveals-brains-seat-confidence-when-decision-making
From the other side of the street that is called "upselling." Its a well-known phenomenon especially when any kind of financing is involved. Because $300 seems like such a small sum next to the $50k, it appears smaller.
My favorite story about this is from my good friend Brian, who always negotiates tooth and nail for every penny when buying a new car. One time they had a charge of $200 for the car mats and he was like "Oh HELL no!" and had that removed from the contract. Come the day to get his own car mats he discovered they would have to be custom made, and ended up costing him a couple hours of his time and $120. The way he tells the story, saving the $80 was well worth the effort ....