Is there a term that describes the idea "I've already spent this much, I might as well pay a little more to get what I want"?

Question

I came across this idea while looking to buy a house and I wondered if there was a term for it. The initial purchase options have a linear cost to value relationship. However, I'm tempted to make a larger purchase than planned because the additional value is proportionately much higher.

Simple Example:

Option 1: Cost = 3, Value = 3
Option 2: Cost = 5, Value = 5
Option 3: Cost = 7, Value = 10

The title of the question seems to be referring to the sunk cost fallacy (https://thedecisionlab.com/biases/the-sunk-cost-fallacy) but the description makes me wonder if it's just a convex utility function — Ishan Kashyap Hazarika, May 17 '22 at 21:14

score 0 · Answer 1 · answered May 18 '22 at 06:12

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From a Production Theory standpoint, I would argue that you have a convex "production function" (input = Cost, output = Value). In other words, the house purchase has increasing returns to scale.

answered May 18 '22 at 06:12

Martin Georg Haas

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score 0 · Accepted Answer · answered May 18 '22 at 07:52

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I can't see anything but utility maximization here. With a quasilinear utility function, u = v - c, the first two options yield $u=0$ while the third one yields $u=3$.

answered May 18 '22 at 07:52

VARulle

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Maybe the opportunity cost of spending 4 is >3 – user253751 May 18 '22 at 09:46

Is there a term that describes the idea "I've already spent this much, I might as well pay a little more to get what I want"?

2 Answers2