Oly wrote:That's not what the sunk cost fallacy is. It's not about overvaluing, but rather judging future decisions based on past cost (e.g., "You draft a RB in the 2nd round who is productive, then trade him for a 6th round pick?"). We're totally in agreement that he's more valuable than a 6th rounder. But at no point when thinking about whether to keep/trade him should his draft position be relevant.
The context of the response should make it clear I understand the Sunk Cost Fallacy.
The Sunk Cost Fallacy is basing your decision on the value of the draft position or the cost you paid for the item thus overvaluing the item, in this case the player, based on the cost paid. This is why it affects future decision making because you overvalue the initial cost rather than accurately assess the current value or future value of the item. This type of mistake can cost you a lot of money.
The Sunk Cost Fallacy rarely applies when the cost is low and the value is high as that is the goal of any investment is to get more than you paid for it. It almost always applies when you pay a high cost (in this case a 2nd round pick) that you refuse to give up on due to that initial cost. That's why I use the term over-value because it almost always applies in a situation where you overvalue something based on what you paid for it. That is the biggest danger of the Sunk Cost Fallacy is the loss due to overvaluation.
That's why I made it clear I'm valuing K9 based on his current production, not due to overvaluing his draft position.
I noted the 2nd round pick because converting 2nd round picks to 6th round picks is bad investing. It's like buying a stock at 10 bucks then selling it for 2. It's not great at all.