GLOSSARY · BUDGETING, SPENDING & SAVING
Sunk cost fallacy
The tendency to keep spending on something because of what has already been spent on it, even though that money cannot be recovered whatever you decide next. A sound decision looks only at future costs and benefits. Asking whether you would buy the thing today, at today's price, is a simple way to set sunk costs aside.
Also called: sunk cost effect, sunk cost trap
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SOURCES
- The Psychology of Sunk Cost. Arkes & Blumer, Organizational Behavior and Human Decision Processes, 1985.