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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.
Escalation of commitment, irrational escalation, or sunk cost fallacy, where people justify increased investment in a decision, based on the cumulative prior investment, despite new evidence suggesting that the decision was probably wrong. G. I. Joe fallacy, the tendency to think that knowing about cognitive bias is enough to overcome it. [65]
The sunk-cost problem helps explain why it was so hard to end that war. It is worth considering this problem as we reflect on current wars. The sunk-cost fallacy applies in our thinking about the ...
The Sunk Cost fallacy is a biased committed when individuals base their decisions to stop or continue a course of action solely on past irrecoverable invested costs (i.e., monetary or time-related). Individuals' susceptibility to the Sunk Cost fallacy has been justified as the need to try to avoid appearing wasteful, to avoid appearing ...
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.
Daniel Kahneman, who won the 2002 Nobel Memorial Prize in Economics for his work developing prospect theory. Prospect theory is a theory of behavioral economics, judgment and decision making that was developed by Daniel Kahneman and Amos Tversky in 1979. [1] The theory was cited in the decision to award Kahneman the 2002 Nobel Memorial Prize in ...
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 ...