Doggie Bags & Sunk Costs
Did you ever get a meal at a restaurant that you didn’t like, but have them wrap up the leftovers anyway? Even though the food’s flavor is unlikely to improve with age, there may be an explanation for the seemingly irrational behavior. (For non-US Neuromarketing readers, restaurant leftovers are often packaged in a “doggie bag” even though the consumers will be human rather than canine.) According to B. Venkatesh, a self-proclaimed investment psychologist and writer for the Hindu Business Line,
The nucleus accumbens, the brain’s reward system, is turned on whenever you see a product that you desire. The insula, on the other hand, is activated when you suffer from aversion, like spending money.
You buy a product when the nucleus accumbens overwhelms the insula. But when your purchase decision (ordering food) turns wrong, the insula gets activated and increases your pain. To pacify the pain, you decide to take the food home and “repair” it. [From the Hindu Business Line – Overcoming Painful Decisions by B. Venkatesh.]
Venkatesh attributes our reluctance to abandon the distasteful food to a “pain of wasting” – the more we paid for the meal, the more it will “hurt” to discard the leftovers. This pain tends to wane over time as our brain becomes occupied with new issues, and we will eventually discard the food.
I think this is all part of the broader issue of sunk cost. Economists have long argued that sunk costs, i.e., money that has already been spent and can’t be recovered, are irrelevant to decision-making. Only new costs, they say, should be considered. Behavioral economists, who take into account not just economic theory but also real-world human behavior, argue that sunk costs do indeed affect our decisions whether or not that is rational.
In Small Favors, Big Success, I wrote about how performing a small favor for someone makes us more likely to follow up with a big favor. Neuromarketing reader Scott commented that this might well be part of the sunk cost phenomenon – having invested time in helping someone, you tend to continue to do so, he proposes.
Seth Godin makes the point of sunk cost irrelevance briefly but eloquently in Ignore Sunk Costs. Good advice, but hard for our human brains to actually follow.
The ultimate fate of leftovers depends on where the meal was eaten, the preferences of the diner, and the prevailing social culture.
Perhaps “sunk costs” are a reason why people who have sent money in on a scam are likely to send in MORE money because they are wanting the scam to be true and hope to get some money out or back.
I was a Western Union agent for 9 years and our telling people that they would not get their money back, some people would still want to send money to a scammer, or I found out later that they went to another agent and sent more money after we refused to send for them. Sometimes you can not protect people from themselves.
“The nucleus accumbens, the brain’s reward system” — I thought it was more somewhat complex than that.
It’s probably also related to prospect theory – which is a form of sunk cost. Once we own it, we find it hard to give up… that’s why we buy clothes, get home, realise we don’t like them anymore, but still can’t bring ourselves to throw them out (at least for a while, until our spouse tells us to…).
i would go even further to say that sunk costs seem to lead people to “throw good money after bad” despite all the proverbial warnings to the contrary!