This morning I was woken up by cheers from a crowd of runners (c 14,000) who were gearing up for the round the bays run. I thought to myself, as I often have, how bizarre it is that people pay money to run in public roads. For instance, I ran a section of the race yesterday, free of charge.
So why are these things so popular?
I think running races exploit a common decision making pitfall fall, factoring in sunk costs when they shouldn’t.
A sunk cost is:
The sunk cost decision making pitfall is where sunk costs affect rational decision making.
An example of this irrational decision making is bad weather at a sports game. Two people (who have the same tastes) are going to a sports game, a rugby game or a football game, it doesn’t matter which. One person has a free ticket while the other pays for their ticket (both of their tickets are non-refundable). The night of the game comes and there is a huge storm (rain and hail and all sorts of nasty weather). So which of the two people is most likely not to go to the game? The person that got the free ticket or the one that paid for their ticket?
The sunk cost decision making pitfall would say that the person who didn’t pay for the ticket will be the one that doesn’t go and the person that paid for their ticket will go in the rain and have a miserable time (assuming they don’t like the rain etc). But really they both should have made the same decision as the ticket cost is forgone and cannot be recovered so it shouldn’t’ factor into their decision to go or not go. They should only base their decision only on whether they still want to spend their time at the game or doing something else (i.e. not getting rained on) not on how much they have paid for it.
So it is this premise that these running events base themselves on. People pay for, often, non-refundable entrance fees for a run ahead of time. People then tell themselves that they should get their money’s worth so they force themselves to train for a run, on a public road, in a few months time. When thinking about it people should really be asking themselves each week/ day if they feel like training for a run or not and assessing their fitness closer to the time of the event if they are fit enough to run. But this is not how people think about it, they factor in the non-refundable fee from the past, train when they wouldn’t otherwise and end up running the race on the public road.
This leads me to think two things:
1) there are very few rational economists running the round the bays, and
2) thankfully people are irrational or there would be a lot more unfit people in the world.