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Cab Driver's Fallacy

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The Cab Driver's Fallacy:

Similar to the sunk-costs fallacy; having a particular goal in mind and refusing to give up on it, however impossible it seems, while also ignoring the possibility of doing even better. Named for the tendency of taxi drivers to try to earn a specific amount each day. On slow days they will keep going to reach the target, while on good days they will quit early as soon as the target is reached. They would do much better if they would go home early on slow days (thus saving gas, as well as wear and tear on the car, not to mention the driver) and keep going past their target if it's busy (when they barely have to drop off one fare before getting another one).

So far as cab drivers are concerned, this may be explained by risk-aversion. When it comes to something like income, most people are risk-averse - they would rather be guaranteed a steady flow of money rather than risk a large variance in the amount received (possibly negative) turn-by-turn, even if the latter would yield more money in the long run.

Alternative Title(s): The Cab Drivers Fallacy


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