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Topic: Sunk cost fallacy

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opportunity cost

production, costs, and pricing

low cost carriers

marginal costs

full cost accounting

sunk costs

transaction costs

social costs

Cost push inflation

capital costs

cost of production theory of value

fixed cost

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	sunk-cost fallacy
		This fallacy is also sometimes referred to as the Concorde fallacy, after the method of funding the supersonic transport jet jointly created by the governments of France and Britain.
		The crash of Air France Flight 4590 on July 25, 2000, that killed 113 people—even though it was due to a freak accident and not a design flaw—put an end to any hope that anyone might have had for further development of the Concorde.
		The Sunk-Cost Fallacy - Bush falls victim to a bad new argument for the Iraq war.
	skepdic.com /sunkcost.html (454 words)

	Sunk cost - Wikipedia, the free encyclopedia
		Sunk costs are sometimes contrasted with incremental costs, which are the costs that will change due to the proposed course of action.
		In this case, your sunk cost with respect to the car at any given time is the difference between how much you originally paid and how much you could sell it for now.
		The sunk cost fallacy is also sometimes known as the "Concorde Effect", referring to the fact that the British and French government continued to fund the joint development of Concorde even after it became apparent that there was no longer an economic case for the aircraft.
	en.wikipedia.org /wiki/Sunk_cost (884 words)

	Sunk Cost
		The sunk cost fallacy is manifested when we have a greater tendency to continue an endeavour once an investment in money, effort or time has been made.
		It is found that those who had incurred a sunk cost inflated their estimate of how likely a project was to succeed compared to the estimates of the same project by those who had not incurred a sunk cost.
		The sunk cost effect was not lessened by having taken prior courses in economics.
	sunk-cost.behaviouralfinance.net (1656 words)

	Ecology and Society: Overexploitation of renewable resources by ancient societies and the role of sunk-cost effects (Site not responding. Last check: 2007-10-25)
		Because higher draft picks cost the team more money, both their greater playing time and their enhanced career longevity are examples of the influence of high sunk costs.
		The simplification of the complex society was implemented by removing the structure of ranks and honours, simplifying the civil administration, reducing governmental transaction costs, and cutting the costs of the army.
		Sunk costs and the natural resource extraction sector: analytical models and historical examples of hysteresis and strategic behavior in the Americas.
	sunsite.wits.ac.za /eco/vol9/iss1/art6/main.html (6645 words)

	Werther Report: The Sunk Cost Fallacy
		It is stubbornness; it is also the sunk cost phenomenon at work.
		Eighteen years later, the unit cost is almost $300 million, and the plane is not yet in service.
		In so doing, it explicitly invoked the sunk cost argument, which was doubly fallacious because not only was it unrelated to potential dividends in a changed strategic environment, but it lowballed future development and production costs, thereby making the argument even more skewed.
	www.d-n-i.net /fcs/comments/c509.htm (1181 words)

	Particletree » Programming and The Sunk Cost Fallacy
		Basically, the sunk cost fallacy occurs when you make a decision based on the time and resources you’ve already committed and not on what would be the best way to spend your remaining time and energy.
		The sunk cost fallacy happens when you continue to add to the inefficient code because you’ve already invested so much time into what’s there and because reworking the code would be a headache.
		The sunk cost fallacy really comes into play when you tell a new client that something of theirs needs to be completely redone and they resist because they spent a lot of money on it.
	particletree.com /notebook/programming-and-the-sunk-cost-fallacy (687 words)

	[No title] (Site not responding. Last check: 2007-10-25)
		For example, when you pre-order a movie ticket, the price of the ticket becomes a sunk cost; even if you later decide that you'd rather not go to the movie, the odds that you would be able to resell your ticket are essentially zero.
		Thus, there is no way to get back the money you originally paid and you have a sunk cost on your hands.
		An common example of a sunk cost for a business is the promotion of a brand name.
	www.informationgenius.com /encyclopedia/s/su/sunk_cost.html (517 words)

	Sunk cost - Surch
		In microeconomic theory, only incremental cost are relevant to a decision.
		You may in fact find some amusement in how bad the movie turned out to be, and take pride that you recognise it to be bad.
		This type of marketing incurs costs that cannot normally be recovered - it is not typically possible to later "demote" one's brand names in exchange for cash.
	www.surch.co.uk /-/Sunk-costs.html (727 words)

	Business Economics: The economic analysis underlying corporate decision making: what economists do when confronted with ...
		Nearly half of the economists indicated that their company was involved from time to time in a "sunk cost fallacy," and they conceded that it was eliminated only gradually.
		Despite problems of handling sunk costs, several economists stated that decision-making in their companies was more analytical than several years before, and two in enterprises for which bidding is important maintained that the infamous winner's curse was becoming less common.
		With respect to cost reduction, several participants mentioned their company's on-going concern with reducing costs, and three noted the contribution of outsourcing (or the reduction of worker benefits) to cost reduction.
	www.findarticles.com /p/articles/mi_m1094/is_3_39/ai_n6206024/pg_3 (1231 words)

	Boiled Shrimp and the Sunk-Cost Fallacy
		The sunk-cost fallacy is one of the pillars of behavioral finance, the only academic discipline that actually explains why investors do the irrational things they do.
		They focus on their sunk cost of $20 per share and all they want to do is get even.
		They can't sell because they have a large sunk cost and because they believe that, by not selling, they are somehow avoiding the loss.
	blog.kiplinger.com /blog/archives/2006/04/boiled_shrimp_a_print.html (922 words)

	Bush is a sucker for the sunk-cost fallacy. - By Barry Schwartz - Slate Magazine
		The fallacy in thinking about sunk costs is precisely that people feel compelled to get their "money's worth," even if it makes them suffer.
		And the sunk-cost fallacy appears in the most consequential of contexts, where injury and death, and not just money or effort, are at stake.
		To acknowledge sunk costs and change course need not be an admission of foolishness or even failure.
	www.slate.com /id/2125910 (1089 words)

	SoftwareCEO Discussion Forums - Zero or near zero pricing
		To me, this is the very definition of sunk cost + marginal cost pricing theory, but I'm having trouble selling this concept internally - lots of invested time over the past few years "that we have to recoup" (sunk cost fallacy), lots of arguments about "value" and previous juicy pricing on deals (cf.
		With respect to the marginal cost argument, in theory you could price at that level but it would contribute nothing to the costs of maintaining the code base that is the result of the sunk cost.
		If you want to add something to those costs for profit or to refill your bank account for the development effort, you can but that is optional.
	www.softwareceo.com /forums/printthread.php?t=1059 (1006 words)

	The Wealthy Blogger » What is a Sunk Cost? (Site not responding. Last check: 2007-10-25)
		You have probably encountered Sunk Costs in your business interactions: I often go into pawn shops and see items like 4 year old Pentium II computers selling for $400, shaking my head because new computers can now be bought for less.
		This is called the Sunk Cost Fallacy: the tendency to fear loss and allow the fear of loss to influence their business decisions.
		It is important to learn from those things that cause a lot of Sunk Cost, and provide too little pleassure or profit.
	www.wealthyblogger.com /financial-management/what-is-a-sunk-cost (815 words)

	sunk cost definition
		Sunk cost are the past expenditures for a given activity that are typically irrelevant in whole or in part to future decisions.
		The “sunk cost fallacy” is an attempt to recoup spent dollars by spending still more dollars in the future.
		Contact us for a business plan quote to learn more about how we define sunk cost and how we can help you complete your business plan today.
	www.hjventures.com /glossary-sunk-cost.html (134 words)

	The sunk cost effect in pigeons and humans. (Site not responding. Last check: 2007-10-25)
		The sunk cost effect in pigeons and humans.
		The sunk cost effect is the increased tendency to persist in an endeavor once an investment of money, effort, or time has been made.
		We developed a behavior-analytic model of the sunk cost effect to explore the potential for this behavior in pigeons as well as in humans.
	seab.envmed.rochester.edu /abstracts/JeabAbstracts/83/_83-001.Htm (329 words)

	Fallacy of Sunk Cost & Transsexualism
		A fallacy is an illogical way of thinking that's very appealing to almost everybody almost all the time.
		Sunk cost is a concept from decision theory, a branch of psychology combined with a branch of mathematics.
		The $100 you have already paid is technically termed a sunk cost.
	www.genderpsychology.org /psychology/sunkcost.html (754 words)

	The Science Of Behavioral Economics
		Sunk-Cost Fallacy: This is one of those phenomena of behavioral economics that persists, even after we are confronted with the illogical nature of it.
		People are more likely to attend an event if they paid for the ticket than if they obtained it for free, even when they have the same information and interest in the event.
		Given a choice of televisions costing $300, $500, and $700, for example, not many choose the $700 one.
	www.everythingaboutmoney.info /behavioraleconomics.html (468 words)

	The sunk cost fallacy
		One irrationality he describes is called the "sunk cost" error.
		It is OK to fail when the costs are small if it will cost a fortune to fail later.
		The refusal to abandon a useless project in which a sum of money has been invested is known as the "sunk cost error".
	easyweb.easynet.co.uk /~dylanwad/PerCon/OK/sunk_cost_fallacy.html (275 words)

	Knowledge for my Children: Good money after bad
		Technically called the 'sunk cost fallacy,' it infers that very often our decisions about a future event are weighed down by the actions of the past (Gilovich).
		We finish a bad book because we are already halfway through it; we sit through a boring movie because we already bought the ticket; we spend too much money on car repairs (in comparison to the worth of the car) because we have already spent so much on the car.
		The sunk cost fallacy states that you are more likely to plunk down the money for a new transmission if you have already sunk hundreds or thousands on the repair of your clunker.
	garycasagrande.blogspot.com /2005/01/good-money-after-bad.html (244 words)

	Three errors
		The important thing about sunk costs is that there is nothing that can be done about them: whatever decisions are made in the future, the sunk cost will not change.
		The sunk cost fallacy, also known as the Concorde effect, is to take sunk costs into account when making decisons.
		And for a lot of things it works reasonably well: if you have three hundred houses to build, and a house takes a person a year to build, then clearly you can employ one person for three hundred years, or three hundred people for a year, for approximately the same result.
	www.tfeb.org /essays/three-errors.html (2609 words)

	Capital Ideas Online > Why Smart People make big money mistakes and how to correct them (Site not responding. Last check: 2007-10-25)
		Most people are much more willing to lock in sure gain that comes with selling a winning stock or fund than they are willing to lock in the sure loss of selling a losing investment, even though it generally makes more sense to sell the losers and keep the winners.
		Another particular form of loss aversion to which we are prone to is “sunk cost fallacy.” Traditional economics predict that people will consider the present and future costs and benefits when determining a course of action.
		But past cost should not be a factor.
	www.capitalideasonline.com /articles/index.php?id=1162 (1712 words)

	Cyberlibris blog: Economics (Site not responding. Last check: 2007-10-25)
		In short, a sunk cost is an expenditure made in the past that cannot be modified.
		A sunk cost is a cost that cannot be recovered.
		Only when a project would require a given amount of costs to be implemented would these costs be taken into account as they are indeed triggered by the project.
	cyberlibris.typepad.com /blog/economics (9121 words)

	Research at HP Labs : Information Dynamics Lab : Papers : Quantum Solution of Coordination Problems
		We seek to isolate in the laboratory factors that encourage and discourage the sunk cost fallacy.
		Subjects play a computer game in which they decide whether to keep digging for treasure on an island or to sink a cost (which will turn out to be either high or low) to move to another island.
		The data reveal a surprisingly small and erratic sunk cost effect that is generally insensitive to the proposed psychological drivers.
	www.hpl.hp.com /research/idl/papers/sunk (163 words)

	[No title] (Site not responding. Last check: 2007-10-25)
		The incremental variable cost for a change in sales is often not equal to the average variable cost.
		They are the fixed costs incurred to implement a change in pricing.
		MOST FIXED COSTS ARE NOT INCREMENTAL Since they do not change with a change in price or sales, they are not incremental.
	www2.bc.edu /~smithgg/S-04_814_Costing_OHs.ppt (396 words)

	Featured Working Paper-Avoiding Traps (Site not responding. Last check: 2007-10-25)
		Above all, each firm must know which kind of standards battles it is facing, which in turn hinges on the compatibility of its own new technology with prior technology as well as that of rivals.
		This trap of weak commitment is the flip-side of another well-known trap – the sunk cost fallacy.
		The irony is that the very firms that are overly committed to their core business (the sunk cost trap) are often too quick to pull the plug on investments in emerging technologies.
	emertech.wharton.upenn.edu /ConfRpts_Folder/wpTraps.html (9654 words)

	IGDA - Articles - Addiction
		Mike introduced the concept of “sunk cost” to the panel and audience.
		What you are calling “sunk cost” I call “cost benefit” and a person goes through sort of a cost benefit analysis, and this is true of any kind of addiction.
		The “sunk cost” is just another term for a similar behavior.
	www.igda.org /articles/austin_addiction.php (4177 words)

	CampusProgress.org \| A New New Deal: The War in Iraq and the Sunk Cost Fallacy
		We hear it all the time in regards to the American quagmire in Iraq: "We must see this through and make sure that the sacrifices of our men and women in uniform have not been for nothing." This same rational was used to defend continued American involvement in the Vietnam War, another foreign policy disaster.
		But rather than rationally identifying the fact that this expenditure is "sunk," most consumers magnify its cost by "sticking it out".
		The same holds true in foreign wars: the fact that we are in Iraq now has nothing to do with what we should do going forward; the cost is sunk.
	www.campusprogress.org /page/community/post/kevco0509/C3qJ (334 words)

	Knowledge Problem: MARGINAL REVOLUTION! (Site not responding. Last check: 2007-10-25)
		I also particularly like Alex's comments about human psychology and the sunk cost fallacy, although I'm not entirely convinced that overcoming the sunk cost inertia was truly the choice of a rational economic agent.
		Consider this: Alex goes out to shop without his wallet, goes home to get it, and the traffic and drudgery of northern Virginia is so exhausting that it's not worth it at the margin any more, given his current state.
		The current Medicare tax on employers and employees is inadequate to cover the costs of Medicare Part A in the future; and the tax has not been increased under the current bill to cover the cost of the new benefit.
	www.knowledgeproblem.com /archives/000637.html (675 words)

	Amazon.com: Books: Why Smart People Make Big Money Mistakes--and How to Correct Them: Lessons from the New Science of ... (Site not responding. Last check: 2007-10-25)
		The different in the cost of the total interest you pay is enormous, yet almost everyone gets a 30 year mortgage.
		It's quite interesting to see that how we make money decisions is based as much on psychological principles (namely loss aversion, sunk costs and framing of the gain or loss) as on a rational calculation of cost and benefits.
		While it's true that there are people who have been able to 'beat the market', the authors merely report studies suggesting that most people who choose their own investments under-perform the market, and why this happens (framing of investment decisions, emotional investing, loss aversion, sunk costs, etc.).
	www.amazon.com /exec/obidos/tg/detail/-/0684844931?v=glance (2066 words)

	List of fallacy pages:S - EvoWiki (Site not responding. Last check: 2007-10-25)
		Slanting Fallacy - picking and choosing the evidence for one's case, neglecting the evidence against it
		Spotlight Fallacy - drawing a conclusion based on the sample of data that is widely circulated
		Syllogistic Fallacy - fallacious argument illogically connecting "all A are (not) B" and "some A are (not) B" sentences
	wiki.cotch.net /index.php/List_of_fallacy_pages:S (1214 words)

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