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Sunk cost. In economics and business decision-making, a sunk cost (also known as retrospective cost) is a cost that has already been incurred and cannot be recovered. [1] [2] Sunk costs are contrasted with prospective costs, which are future costs that may be avoided if action is taken. [3] In other words, a sunk cost is a sum paid in the past ...
Escalation of commitment. Escalation of commitment is a human behavior pattern in which an individual or group facing increasingly negative outcomes from a decision, action, or investment nevertheless continue the behavior instead of altering course. The actor maintains behaviors that are irrational, but align with previous decisions and actions.
From the traceability source of costs, sunk costs can be direct costs or indirect costs. If the sunk cost can be summarized as a single component, it is a direct cost; if it is caused by several products or departments, it is an indirect cost. Analyzing from the composition of costs, sunk costs can be either fixed costs or variable costs.
Alamy A few weeks ago, I had tickets to an NFL game. It was freezing that day, and all my friends backed out. But I didn't want to waste the $70 I'd spent on the ticket. So I went to the game ...
Alamy There are some economic terms most of us know and understand, such as supply and demand. And there are other terms we will probably never even run across, like implicit logrolling and a ...
Some costs that require firm to comply in order to exit market. For example, remediation costs due to environmental regulations. High fixed exit costs. "can include loans, which the company pays back over time, property costs, vehicle costs or any settlement packages for investors or employees." Indirect opportunity costs of exit: Sunk costs.
To mitigate cognitive biases, such as the sunk-cost bias, educators must raise students' awareness of these common judgment errors. In this article, the author proposes a classroom activity that actively engages students and allows them to identify this bias in their own judgments.
The IKEA effect is thought to contribute to the sunk costs effect, which occurs when managers continue to devote resources to sometimes failing projects they have invested their labor in. The effect is also related to the " not invented here " (or "NIH", or even "NIH syndrome"), where managers disregard good ideas developed elsewhere, in favor ...