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. | ||
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. | |||
== See also == | == See also == | ||
* [[Cognitive bias]] | * [[Cognitive bias]] | ||
* [[Incremental cash flows]] | |||
* [[Opportunity cost]] | * [[Opportunity cost]] | ||
* [[Project appraisal]] | |||
* [[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.
