My wife and I are having a disagreement as to what it means. She says that it means the cost of something you purchased some time ago, and had you not purchased it the money would be gone anyway.
Basically, 3 years ago we decided to purchase something to hold onto and sell later on when the value goes up. She says that the purchase price can be considered as profit since it was so long ago. I disagreed. Anyway, she calls it “sunk cost”.
In: 59
Sunk cost is the money, time, or effort already invested in something. But it’s “sunk” because you can’t easily undo that investment, or get that investment back, especially if it’s time or effort. There’s no refund.
Usually it’s used in the context of the “sunk cost fallacy”.
The Sunk Cost Fallacy, is when someone refuses to abandon a failed idea, because they’ve already invested so much in it. So they just keep investing more, thus digging the hole deeper. It’s a major reason why people refuse to abandon investments that are losing money, or stay in jobs they hate, or relationships that are toxic.
Latest Answers