The concept of Sunk Costs and Ammo

[roval]

I have been reading a book on behavioral economics trying to glean insight into my behavior which might help with financial decision making when I came across the concept of sunk costs. " a cost that is already incurred and cannot be recovered" and how it affects our decisions regarding those costs.(example - sitting through an awful movie or book as you had already paid for it or finishing a bad meal you would not have eaten otherwise as you've already paid for it when finishing the book or movie or eating the meal wouldn't bring back the previously incurred costs). this also explains why a lot investors hold on to their losing investments too long.

During the last panic post Sandy Hook I started shooting much less even if I had the ammo as it would lead to a real prospective cost(future cost) of having to replace the ammo that I would be shooting. Sometimes though it was too extreme especially with non reloadable rounds. I still had several thousand rounds of 22lr but cut back on the shooting. (Did I honestly think 22 lr would never come back to reasonable prices.) If I used up the rounds I had then I could quit shooting at that point which would just be identical to my then -current situation of not shooting(not shooting my bullets would not have refunded my previous costs)

I had a gun a ruger single nine 22 magnum that i decided to quit shooting due to the price of the ammo's cost to replace it. i did continue shooting 9 mm and 45 acp which i can reload. Due to the price of the ammo I traded in the single nine though my wife did enjoy shooting that gun. ( i still have a single ten and I doubt she'd notice a difference. )

last week I was reorganizing my 22 lr to start using up the older boxes first when I came across 800 rounds of CCI 22 magum which I currently don't have a gun for. at the very least I should have kept shooting that single nine till the ammo ran out.

Moral of the story: shoot what you have and don't squirrel it away. it doesn't bring back the money you've already spent on it and you can quit shooting it when you've run out which would just be the same as having the bullets and not shooting them.

 

[jmorris]

I think I’d look at it like finding money in a jacket you haven’t put on since last winter, more than wasted money.

Sounds to me like you have a good reason to buy another gun or at the very least, assuming you didn’t get gouged on the buy, sell it during this panic and get more return on it now than if you had sold it over the last 3 years.

It’s only a “sunk cost”, if you do neither and stick it back in the hole where you found it.

 

[roval]

I have a CZ455 ultra lux in 22 LR. somebody told me to consider a 22 mag barrel for it.(cheaper than buying a whole new gun). That sounds interesting if it comes equipped with the same sights as the other gun. this way the barrels keep their zero.

 

[Pat Riot]

I try not to look at my shooting “hobby” as a financial plan. If I did I would definitely be a very poor financial planner. One that has had fun, learned a lot, built wonderful friendships and relationships with other shooters and like minded folks. Actually, I am a darn good financial planner. My results are priceless.

 

[roval]

actually with my reply about the 22 mag barrel i may be ignoring the concept of a sunk costs. buying another barrel will not refund my costs for the prior ammo but will certainly provide a use for it. the question should be- would I buy a 22 mag barrel for the cz 455 anyway on it's own merit not just because i have ammo for it. if so then it's win win.

this is what's interesting about reading behavioral economics. we don't necessarily do what's logical but people do have pattern's of behavior that keep getting repeated and one has to be introspective to recognize it.

 

[FlSwampRat]

I have been reading a book on behavioral economics trying to glean insight into my behavior which might help with financial decision making when I came across the concept of sunk costs. " a cost that is already incurred and cannot be recovered" and how it affects our decisions regarding those costs.(example - sitting through an awful movie or book as you had already paid for it or finishing a bad meal you would not have eaten otherwise as you've already paid for it when finishing the book or movie or eating the meal wouldn't bring back the previously incurred costs). this also explains why a lot investors hold on to their losing investments too long.

I've walked our of movies and left a book to rot in the woods as I really felt they were bad.
I've sent dinners back to the kitchen and ordered something else before. If they wouldn't take it back and I determined it wasn't bad in the sense of rotten and having the potential to make me sick, I might eat it, depending on how bad the taste was.
The difference between the two sets of examples above is that in the first case I would also be wasting time on watching/reading it above and beyond the monetary cost involved.

During the last panic post Sandy Hook I started shooting much less even if I had the ammo as it would lead to a real prospective cost(future cost) of having to replace the ammo that I would be shooting. Sometimes though it was too extreme especially with non reloadable rounds. I still had several thousand rounds of 22lr but cut back on the shooting. (Did I honestly think 22 lr would never come back to reasonable prices.) If I used up the rounds I had then I could quit shooting at that point which would just be identical to my then -current situation of not shooting(not shooting my bullets would not have refunded my previous costs)

I had a gun a ruger single nine 22 magnum that i decided to quit shooting due to the price of the ammo's cost to replace it. i did continue shooting 9 mm and 45 acp which i can reload. Due to the price of the ammo I traded in the single nine though my wife did enjoy shooting that gun. ( i still have a single ten and I doubt she'd notice a difference. )

last week I was reorganizing my 22 lr to start using up the older boxes first when I came across 800 rounds of CCI 22 magum which I currently don't have a gun for. at the very least I should have kept shooting that single nine till the ammo ran out.

I have a floor limit below which I won't go on certain calibers as you never know when you might need the defensive calibers. I don't consider 22LR a defensive round so I'll use that til I'm scraping the paint on the bottom of the ammo can. Besides, I really like my 22's

Moral of the story: shoot what you have and don't squirrel it away. it doesn't bring back the money you've already spent on it and you can quit shooting it when you've run out which would just be the same as having the bullets and not shooting them.

It is possible, however, to have to spend more to replace the stuff you shot, always keep an eye on replacement costs.

 

[roval]

I try not to look at my shooting “hobby” as a financial plan. If I did I would definitely be a very poor financial planner. One that has had fun, learned a lot, built wonderful friendships and relationships with other shooters and like minded folks. Actually, I am a darn good financial planner. My results are priceless.

i don't look at it as a financial plan either. Shooting is a consumptive hobby and to people that often say buying so and so gun is an investment. I wholeheartedly disagree but would not try to dissuade you from your POV. there are other things that would offer a better rate of return and would be more liquid. In this era again of panic buying and hoarding of ammo for some people i hope the post may provide some food for thought.

see even my knee jerk reply of buying a 22 mag barrel for a gun was immediate but may not necessarily be logical unless I really wanted one.

 

[roval]

I've walked our of movies and left a book to rot in the woods as I really felt they were bad.
I've sent dinners back to the kitchen and ordered something else before. If they wouldn't take it back and I determined it wasn't bad in the sense of rotten and having the potential to make me sick, I might eat it, depending on how bad the taste was.
The difference between the two sets of examples above is that in the first case I would also be wasting time on watching/reading it above and beyond the monetary cost involved.

And that is how it is supposed to be logically done but a lot of people do not act logically . The costs were already incurred no matter what why suffer through a bad experience. I am guilty of finishing a not so good meal since I already paid for it.

 

[brewer12345]

While I applaud your study of behavioral economics (I had my eldest reading a book about it when she was 11), I don't believe that we can view ammo already bought as a sunk cost. Simply put, you CAN recover your costs and perhaps quite a bit more. Sell your stash on the open market today and you will likely make a profit.

All that aside, the decision of whether to burn up ammo in a panic has another facet. The candidate of the "loyal" opposition has bluntly stated as a campaign promise that he will attempt to ban all internet sales of ammo, firearms, etc. He will has a slew of draconian proposed measures besides purchase restrictions. It is a non-zero risk that he will win and carry a bunch of his party with him, thus giving him the leverage to ram a bunch of this through Congress. The constitutionality of this sort of thing is debatable, but at the very least the ensuing panic will shut off ready access to replacement supplies for the foreseeable. So when you are shooting it up, it isn't sunk costs you need to be considering but how long your pile will last in the face of little or no access to resupply. I'd suggest designating at least a portion of what you have as a minimum reserve for the long term. If your pile is deep, perhaps that means you can shoot with abandon through most of any disruptions.

 

[wankerjake]

Yeah you should be able to get full retail for that ammo. Or equal retail trade for something you’ll use

 

[FlSwampRat]

And that is how it is supposed to be logically done but a lot of people do not act logically . The costs were already incurred no matter what why suffer through a bad experience. I am guilty of finishing a not so good meal since I already paid for it.

First I abhor waste, and having paid for the meal, I would eat it and not enjoy it, barring it's possible ability to make me sick.
One has to look at cost as a thing above and beyond original purchase cost, however. In the case of the book and movie, I would be investing also my time, which has a value to me, as it should to anyone.
In the case of ammo, it doesn't depreciate much over time, and as @brewer12345 pointed out, you can sell it and, right now, make money most likely. However, if you're hanging on to it you have to ask why and just exactly what you anticipate coming down the future's highway. If I'm stockpiling ammo against the thought of Antifa but I'm not hardening the defensive rating of my home and castle, there comes a point where I'm actually wasting money by overspending on one and not spending some to stiffen up the other.

 

[Ignition Override]

As long as one’s home doesn’t burn down.

wankerjake reminds us of the trade value. Good option.
With so many surplus handguns (many are modern, high quality semi-auto) and rifles on Armslist in this area, the timing might be optimum for those gun sellers who aren't broke.

 

[FROGO207]

Yes resupply worries are a present concern. One bird in hand beats a dozen in a bush. Add to that that there is always inflation and the costs to resupply will often be greater in the future. Buying more now as a hedge against future price increases is a thing worth considering.

What the OP is lacking is a good grip on his inventory to help him make informed, sound decisions. Yes, today he might be able to sell that ammo at a profit but that will not always be the case if he can't afford to sit on it for a favorable market.

 

[readyeddy]

Having ammo for recreation is nice, but having ammo for defense is a necessity. Because of that, I will never run out of ammo due to recreational or practice shooting.

 

[roval]

the point of the whole post was that a lot of us do illogical things. you want to always have self defense rounds available then of course keep some on hand. target shooting rounds /plinking feel free to shoot if you want. not shooting and just holding on to it is just the same as having run out of it. i stopped shooting 22 lr back then even if i had several thousand on hand not a whole lot but 5-7K. if i shot them and had fun and run out then i would just be at the same point of not shooting 22 lr.

 

[wankerjake]

I think what most of us are hung up on in this particular example is that you have a clear path to recovering the cost so it’s not a sunk cost. It’s a cost incurred but it’s not sunk unless you take the approach of making sure it’s sunk by not turning into a different asset. Which goes back to your point about how sunk costs affect future decisions illogically (like making sure it’s a sunk cost by not turning into a different asset)

As far as having ammo and not shooting it, having an asset that you aren’t currently using is not the same as a loss. It would fall under something like asset or future asset. I’m sure I’ll die with a (maybe large) sum of ammunition. Having that reserve will be providing me utility the whole time. Don’t know what Ayn Rand would say about it but it’s there

It’s only a sunk cost if you’ve paid for it and it’s gone

 

[Reloadron]

It’s only a sunk cost if you’ve paid for it and it’s gone

That's what it comes down to. If I have 1,000 rounds of ammunition and no longer have a gun to shoot it I still have 1,000 rounds of ammunition I can either sell or eventually get another gun to shoot it. My initial investment isn't lost as I can recoup some or all of it. Maybe even show a return on it.

Ron

 

[roval]

I think what most of us are hung up on in this particular example is that you have a clear path to recovering the cost so it’s not a sunk cost. It’s a cost incurred but it’s not sunk unless you take the approach of making sure it’s sunk by not turning into a different asset. Which goes back to your point about how sunk costs affect future decisions illogically (like making sure it’s a sunk cost by not turning into a different asset)

As far as having ammo and not shooting it, having an asset that you aren’t currently using is not the same as a loss. It would fall under something like asset or future asset. I’m sure I’ll die with a (maybe large) sum of ammunition. Having that reserve will be providing me utility the whole time. Don’t know what Ayn Rand would say about it but it’s there

It’s only a sunk cost if you’ve paid for it and it’s gone

while there's utility in having a stockpile i would say there would have been more utility for me if i shot the ammo and yet i did not. i am talking about my 22 mag and 22 lr personal examples.

ammo is not really that fungible(at least without effort) so I'd still consider it as a sunk cost.

i am just pointing out how i look at my actions in hindsight and maybe some other shooters can just relax and enjoy shooting what ammo they have.

 

[Mark1964]

Honest question: Doesn't the "sunk cost" theory as presented here to some degree ignore times of shortage, such as we saw in late '12 to mid '17 (at least as it pertains to .22lr) and as we may be seeing now/soon?
Put another way, if a person with a stockpile has utility during times of shortage -- and/or the ability to resell if he so chooses -- is the cost truly sunk?

 

[Buzznrose]

Honest question: Doesn't the "sunk cost" theory as presented here to some degree ignore times of shortage, such as we saw in late '12 to mid '17 (at least as it pertains to .22lr) and as we may be seeing now/soon?
Put another way, if a person with a stockpile has utility during times of shortage -- and/or the ability to resell if he so chooses -- is the cost truly sunk?

This is how I was taught about “sunk costs.

If I had a plot of land and wanted to build a house, I pay a company to design the home. If the company is a proprietary brand and will designer the home but not provide the blueprints, and the cost is non refundable, and I decide not to build, the money spent on plans I do not own and will not be refunded for is a sunk cost.

Biggest lesson I’ve learned about “sunk costs” is to understand that sometimes, they are the cost of
Learning a lesson, and don’t make it worse.

much like the phrase “don’t throw good money after bad!”

 

[wankerjake]

If you put that ammo on armslist for full retail right now you’ll get it

 

[swingmaster]

I know a few chefs. I’m not sending a meal back to the kitchen. I’ll pay the bill and walk out first.

 

[huntsman]

I’ve found that the WWB I paid $26.00 for shot the same as the box I paid $12.00 for.

Since my goal is SD and I believe in regularly shooting my carry guns I‘m always Susceptible to the market prices.

Cost averaging will help but ultimately the cost of ammo is a trade off I find acceptable, after all it’s not like I waste time and money chasing the little white ball.

 

[earlthegoat2]

The examples you give for sunk costs are a bit flawed because like most surface level economic musings, they forget opportunity costs.

But that’s for another time.

The short story is that the 22 Magnum ammo still has value and is not a sunk cost (at least not a sunk cost equivalent to the purchase price of the ammo, of course also excluding present and future values of the original cost). (Whew, economics is fun).

It a good idea not to learn too much about economics because all you will be able to think about is how much time and money we are all wasting in every moment of our lives.

 

[Fiv3r]

I look at ammo investments as sunk costs as well. Here's the thing: I bought it to shoot it. If I don't shoot it, it's most likely going to sit in my closet until I shoot it or buy a gun to shoot it or give it to a friend to shoot. Im not going to flip it.

What i have found when it comes to "stocking up" on ammo, is that i need to be honest with myself. I have no need or use for thousands of dollars of ammo. Shooting is a lesser hobby of mine. I think that ammo procurement, or the idea of what is "enough", is a slippery slope/gateway to "yeah, but what if?...". Yeah but what if "they" ban it/there is a shortage/I have to shoot at a mob of 200 zombies because of my perception of things going to hell in a hand basket?

My personal honest "need"....a couple boxes to get me through a visit to the range and a spare box for social use. I have no need, time, resources, or frankly desire to stock up beyond what I am going to use for fun.

I dont live the gun life, and I am a fair weather shooter. The sunk cost of a lot of ammo is a very real thing to me. I stilll have 3 or 4 types of ammo kicking around with nothing to feed it to anymore. Not enough to sell and not enough to invest in another gun. Orphan expenses.