Sunk cost fallacy: Difference between revisions
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In reality it is only the opportunity | In reality it is only the opportunity costs of resources that are relevant. | ||
Revision as of 14:56, 31 March 2020
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;
- Failure to close out loss-making market positions.
