Sunk cost fallacy: Difference between revisions
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imported>Doug Williamson (Update 2nd sentence.) |
imported>Doug Williamson (Expand definition.) |
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Consequences of the sunk cost fallacy include: | Consequences of the sunk cost fallacy include: | ||
*Continuing with projects that should be discontinued; | *Continuing with projects that should be discontinued, and "throwing good money after bad"; | ||
*Failure to close out loss-making market positions. | *Failure to close out loss-making market positions. | ||
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== See also == | == See also == | ||
* [[Cognitive bias]] | * [[Cognitive bias]] | ||
* [[Incremental cash flows]] | |||
* [[Opportunity cost]] | * [[Opportunity cost]] | ||
* [[Project appraisal]] | |||
* [[Stop-loss limit]] | * [[Stop-loss limit]] | ||
* [[Sunk costs]] | * [[Sunk costs]] | ||
Latest revision as of 01:14, 7 August 2021
Project appraisal.
The sunk cost fallacy is the mistaken belief that already-committed costs ('sunk costs') are relevant for financial decision making.
In reality it is only the opportunity costs of resources that are relevant.
Consequences of the sunk cost fallacy include:
- Continuing with projects that should be discontinued, and "throwing good money after bad";
- Failure to close out loss-making market positions.
