Sunk cost fallacy

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Revision as of 14:56, 31 March 2020 by imported>Doug Williamson (Update 2nd sentence.)
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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.


See also