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What is Sunk Cost Fallacy and How can it Affect your Decisions?

swati11 on Finance - Sunk costs are those permanent costs that have been incurred and cannot be recovered. Here, the expenses can be of your money, time, or some other asset.

For instance, the tution fees of your college is a sunk cost, as it is an expense that cannot be recovered. This is irrespective of whether you get a job after college or not.

As a rule, individuals should not consider sunk expenses while settling on their choices as these expenses are autonomous of any happenings later on. However, humans are emotional beings, and unlike robots, we do not always make rational decisions.

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