![]() After all, we’ve already invested money into it. ![]() These outcomes range from deciding to stay with a partner even if we are unhappy because we’ve already invested years of our lives with them, to continuing to spend money renovating an old house, even if it would be cheaper to buy a new one. The fallacy affects many different areas of our lives, leading to suboptimal outcomes. The sunk cost fallacy means that we are making irrational decisions because we are factoring in influences other than the current alternatives. Regardless of what we have already invested, we will not get it back whether or not we follow through on the decision. If we acted rationally, only future costs and benefits would be taken into account. ![]() It is irrational to use irrecoverable costs to justify a present decision. Therefore, It should not be a factor in current decision-making. In economic terms, sunk costs are costs that have already been incurred and cannot be recovered.1 In the previous example, the $50 spent on concert tickets would not be recovered whether or not you attended the concert. ![]()
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