Do you lose money if you don't use a plane ticket you won in a raffle?

Question

My wife won 2 tickets from a major airline at the company she works for, after they did a employee only raffle that was free to enter. The problem: there is a caveat: the ticket must be booked for a trip no later than December 15 this year (for extra context today is October 31st). The tickets cannot be exchanged for anything else, nor can they be transferred to or utilized by someone else.

We just went to a very difficult ordeal that have our finances in a difficult situation, so basically, we cannot afford to travel right now. My wife is extremely upset because she is convinced that she is "losing money" for not being able to use the tickets. I think you can't lose what you never had in your possession on first place. My question is, is there an economic concept that I can use to explain to my wife why she is not really "losing" any money?

Answer 1

This is a variation of the sunk cost fallacy. What you paid or didn't pay for the tickets should have no bearing on what you decide to do. The only question you should ask is if this travel will be a net positive for the two of you, taking into consideration the time and cost that will still be required, not to mention the opportunity cost of what you might do instead.

I would say your wife is correct that you are "losing value" by not using the tickets, at least in isolation. (Though this is the opposite of how people usually feel; they tend to want to make sure they use something they paid for, but if they got it for free, they're less concerned.) But it still doesn't make sense to let how you got the tickets influence whether or not to go.

Answer 2

If the tickets are worth e.g. $1000 and you need another $1000 travel expenses to use them, the free tickets basically are a 50% discount on the whole trip.

This is very similar to a $2000 TV that is 50% off. You got free $1000 already just by seeing the ad. You only have to spend another $1000 to redeem it. Do you lose money by not buying the TV? (And don't trust the ad that says you do.)

This assumes the trip itself doesn't have a value.

So you shouldn't completely ignore your wife's opinion[*]. The tickets may hold value (and you would lose that value) e.g. if the trip is something you would do anyway at a later time (with future money that actually has a value now). Or maybe it is a life long dream of your wife to see the Eiffel tower, and this might be the one chance to make it happen. So it might be worth to spend $200 for a weekend in Paris with a free flight worth $3000.

If the trip to the airport is cheap enough, maybe you could just fly somewhere for a day, or just to have breakfast in a foreign country, without spending any significant money, just to use the tickets, and have some fun. (Which might not be very eco-friendly, though.)

This is assuming you can actually not give them to someone else. Or, depending on the rules, maybe your wife could fly with someone else (e.g. not you) that actually needs a flight somewhere, which could save them some money.

[*] Which might also be smart in other situations than this.

Answer 3

Not really an economic concept, but the phrase "just because it's on sale doesn't mean you need it" comes to mind.

Am I losing money by not buying a car that's suddenly $2000 off?

This is basically an on-sale vacation. You pay the hotel, rental car, food, and entertainment and the airfare is free!

Or, discuss numbers. Say the tickets are worth $1000. Now add up food cost, hotel for a few nights, and a rental car. That would easily reach $1000. Are the tickets really free if it will cost you $1000 to enjoy them?

Answer 4

I agree with other answers that you must look at the overall value of the experience for you compared to the cost, not how much would you save for forcing yourself into going on some holidays that you cannot afford or will not enjoy as much.

Other consideration is that, depending on your local laws and on how the company has defined the terms, this could be subject to taxes. Either as part of your wife's salary (*) or because of taxes on gambling prizes.

There are lots of things to consider: the laws, how did the company manage this (if there is a tax on prizes maybe they will pay it so your wife must not pay anything), the value of the prize (has it a value now or it depends on the flight you book?)...

Your wife should go to HR and ask them for the tax implications of the prize and possible options that they can give if it is not possible for you to use them: delaying the expiration date, an exchange for something else (including some money), or the company allowing you to pass them to someone else (perhaps another employee?)...

Answer 5

As other answers have noted, you don't lose any money by not accepting the tickets, but you do lose an opportunity.

Is the opportunity worth taking, given that you'll have to spend money in a tight financial situation to do so? That's for you and your wife to decide. When discussing this, keep in mind that the value of things like vacation trips is entirely subjective and emotional, and thus it's not only possible but almost certain that your wife will value the opportunity presented by these tickets differently than you do.

Or to put this in simpler terms, it's entirely possible that your wife really wants or even needs that vacation with you and that she knows that this is her one and only chance of getting it in the near future, even though the timing is really awkward.

Note that this doesn't mean that she wouldn't be able to live without the vacation if she couldn't get it — it just means that, given that she can get it, she feels that the opportunity is worth taking even in your current difficult financial situation. Maybe you don't currently feel the same way; maybe you even feel that the financial difficulties would make it hard to enjoy the trip at all.

You wife probably doesn't want to take you on a trip where you would be unhappy, but on the other hand, presumably you also wouldn't want to deprive your wife of what might be a once-in-a-lifetime experience or a desperately needed break from constant stress. That's why the discussion part is important, and why you'll need to be open and honest with you wife about how the financial stress you're experiencing makes you feel, while also accepting your wife's feelings about the whole situation as valid, however much their might differ from yours.

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All that might sound off-topic for a finance Q&A site, but there's actually a way to cast all this in perfectly valid financial terms. Specifically, what you and your wife have here is a limited-time discount on an joint investment opportunity. The return from this vacation investment will be emotional and personal for each of you, but no less real for that.

Your task, together with your wife, is to evaluate this investment in the context of your current financial and emotional situation and to decide whether taking the opportunity now — while it is discounted by the price of the tickets, but while your access to liquid funds is limited — is a better decision than either taking a similar trip later (when your finances might be in a better shape, but you'll also have to pay more for the flights) or forgoing the opportunity entirely.

To do this, you will have to balance financial and emotional costs and benefits. Fortunately, while you cannot generally convert things like happiness, self-actualization, memories, richness of experience or stress into money, you can (more or less reliably) go the other way and estimate the emotional costs and benefits of financial decisions over time. So the question you need to ask is whether your expected enjoyment of the vacation, should you take it, is emotionally worth the stress from the financial hardship it would cause you.

And of course, as this is a joint investment between you and your wife, you'll need to carry out this evaluation together, taking into account also the emotional value each of you derives from the other's happiness and from time well spent together.

Answer 6

Loss aversion is the term for people's tendency to over-value things that they already have and might lose, versus things they don't have and might not get. People are usually far more upset by getting something and then losing it/not using it, versus simply never having that thing in the first place. This is why your wife is upset by the notion of getting two free tickets and not using them, but would have been fine with the idea of not having the tickets to begin with. Consider how mundane it is to not win the lottery, but how infuriating and depressing it would be to have picked the right numbers but lost the winning ticket!

Most people view the utility gained by gaining something as somewhat smaller than the utility lost by losing it - it's a common view that you really are worse off than before by simply returning to the status quo! This is purely a psychological effect, however, as there obviously is no real difference in either state where you simply do not have the item. Never having the plane ticket is functionally the same as getting the ticket at no cost and not using it, but there is a real psychological effect that makes the latter "feel worse" - the value of the ticket is psychologically greater when it is viewed as a loss rather than a gain.

Answer 7

The problem: there is a caveat: the ticket must be booked for a trip no later than December 15 this year (for extra context today is October 31st).

On Delta's website I can book something all the way into September of next year.

Is your wife open to a tentative vacation? If finances permit then take the scheduled vacation. If not then eat the cost of rebooking to 2025 or let it expire?

Try picking obscure routes or timeframes which have a high chance of involuntary cancellation due to schedule change. I believe any involuntary change which alters your schedule by 2-3 hours will become the airline's full responsibility so in theory you could rebook for free into 2025.

We just went to a very difficult ordeal that have our finances in a difficult situation, so basically, we cannot afford to travel right now.

I'm sorry to hear about your troubles.

My wife is extremely upset because she is convinced that she is "losing money" for not being able to use the tickets.

Impulse buying/"saving" is no accident. All marketing crafts such mindsets.

I think you can't lose what you never had in your possession on first place.

Correct, unless you were planning to take a vacation anyways. The free tickets are not a justification to spend new money on a vacation.

Instead of a vacation, do you have distant relatives you'd like to visit? Spending time with family should be cheaper than a materialistic vacation.

My question is, is there an economic concept that I can use to explain to my wife why she is not really "losing" any money?

Yes, math.

If you take the vacation then you will return with less money than you started. Not sure how else to sugar-coat that concept.

Answer 8

Another analogy to this situation is the concept of "found money". Imagine you find a wallet and it contains $1,000 in it. You have the choice of keeping the money or returning it to its rightful owner.

If you "do the right thing" and return it, you no longer have the $1,000 you found. But did you really lose it? You're no worse off than you were before you found the wallet. You didn't do anything to earn that money, so you're not out any effort, either.

In the case of the raffle winnings, the only thing you lose is the pleasure of having won something.

I know you say that the tickets aren't transferable, but you might check on how well they enforce this. If there's just some kind of promotion code you enter when buying the tickets, they may not really check. Giving the free tickets to family or friends may be a way to assuage the feelings.

Answer 9

I think there is a conflation in the answers here between the terms "money" and "value".

Your wife's claim that you are losing money by not using the tickets is fallacious. You received the tickets for free, and in doing so, your monetary situation now is no different than they would've been had you not gotten the tickets. As such, if you were to let the tickets lapse without using them, there is no initial investment that would have gone to waste. You can't lose money that you never spent.

If, however, we were to replace the word "money" with "value", then yes, you are losing value by not using the tickets. The tickets themselves have a value that can be exchanged for a service, but after December 31st when they expire and can no longer be used, that value goes away. In this sense, your wife is correct, that if you don't use the tickets, you will have "lost" a hypothetical amount of money equal to the tickets' value.

Ultimately, it comes down to perspective. You can choose to focus on either the fact that you gained ephemeral value in these tickets that you will lose in a couple months, or on the fact that gaining these tickets cost you nothing and, as such, if you choose not to use them, you won't be any better or worse off for having had them in the first place.

Answer 10

Let us, just for the sake of argument, imagine that I am considering giving you one million dollars. Then I change my mind, and decide not to give you anything. Have you lost any money?