Sunk Cost

A sunk cost is a cost that has already been incurred and cannot be recovered. Sunk costs are sometimes referred to as "past costs" because they have already been incurred in the past and are not relevant to current or future decision-making.

Sunk costs can play a significant role in decision-making, as people and businesses may be more likely to continue pursuing a particular course of action if they have already invested significant resources in it.

This is known as the sunk cost fallacy, and it can lead people to make irrational decisions that are not in their best interests. For example, an individual might continue to attend a university course that they are not enjoying because they have already invested a lot of time and money in it, even if they would be better off dropping out and pursuing a different course of action.

© 2002-2024 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.