Sunk cost fallacy: Difference between revisions
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imported>Doug Williamson (Simplify description.) |
imported>Doug Williamson (Add link.) |
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In reality it is only the opportunity cost of resources that is relevant. | In reality it is only the opportunity cost of resources that is relevant. | ||
Consequences of the sunk cost fallacy include: | |||
*Continuing with projects that should be discontinued; | |||
*Failure to close out loss-making market positions. | |||
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* [[Cognitive bias]] | * [[Cognitive bias]] | ||
* [[Opportunity cost]] | * [[Opportunity cost]] | ||
* [[Stop-loss limit]] | |||
* [[Sunk costs]] | * [[Sunk costs]] | ||
Revision as of 14:53, 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 cost of resources that is relevant.
Consequences of the sunk cost fallacy include:
- Continuing with projects that should be discontinued;
- Failure to close out loss-making market positions.
