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emr comments on Open thread, Jan. 26 - Feb. 1, 2015 - Less Wrong Discussion
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Small observation of mine. While watching out for sunk cost fallacy it's easy to go to far and assume that making the same spending is the rational thing. Imagine you bought TV and the way home you dropped it and it's destroyed beyond repair. Should you just go buy the same TV as the cost is sunk? Not neccesarily - when you were buying the TV the first time, you were richer by the price of the TV. Since you are now poorer, spending this much money might not be optimal for you.
In principle, absolutely.
In practice, trying to fit many observed instances to to a curved utility-money curve will result in an implausibly sharp curve. So unless the TV purchase amounts to a large chunk of your income, this probably won't match the behavior.
Rabin has a nice example of this for risk aversion, showing that someone who wasn't happy taking a -100:110 coin flip due to a utility-money curve would have an irrationally large risk aversion for larger amounts.