Monday, 9 November 2015

Interesting fact about sunk cost

I read a very interesting article on sunk costs and how they should NOT influence our economic decisions.

Well, we often do things because we paid for them in the past and do not want to waste the money. Maybe you paid a lot of money for this 1 day trip to another city but you are now sick and do not feel like going. Many of us would still go as we would not like to waste the money we already paid. This actually makes no sense from the economic point of view. Your decision of whether you go or not will not change the cost of the trip - after all you have already paid for it!

Therefore, when making your decision of whether to go or not you should consider the benefits and costs of your decisions and not be concerned about something that cannot be changed (the price you already PAID for the trip). Don't cry over the spilled milk, don't cry over sunk costs.

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