It has been over 11 years since I posted on how asymmetric loss functions affect my behavior. Recall that many situations are situations with asymmetric loss functions: the asymmetry is that a mistake in one direction has a much lower cost than a mistake in the other direction.
I faced this situation big time in shopping in Kenora, Ontario Saturday evening for food to use at my cottage in Minaki. Minaki is a good 40 minutes one way from Kenora. So if I buy too little of something or don’t buy any because the chance I’ll use it is low, the loss from making up for it by driving into Kenora is huge. The gasoline cost is rounding error. The major cost is my time. I get just a little under 2.5 weeks at my cottage each year and so an extra trip to Kenora takes away very valuable cottage time. I can use the time to swim, which I love even though the water temperature is only about 63 Fahrenheit, visit friends, read and fall asleep in the verandah, and listen to the wildlife.
I thought I might have enough bacon but I wasn’t sure, so I bought another package. I could have bought 1.5 pounds of ground beef but, to be safe, I bought over 2 pounds. Those are 2 of about 5 or 6 examples. I’m a fairly good planner and so my guess is that at the end of trip I’ll have not much more than US$40 of food extra. Also, since I like all of my neighbors (oops, I’m in Canada, “neighbours”) a lot, the $40 is an overestimate of the net cost to me because most of my overage will be useful to my neighbours.
The pic above is me in the water by my cottage. The water this year is higher than it has been since I started going to the cottage in 1951. Thus the fact that I’m wading to get to the gangplank that goes to the dock.