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”.
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It’s usually referred to in relation to the “sunk cost fallacy” also known as throwing good money after bad. And in that case it’s about spending more money on something, because you’ve already spent a significant amount. Like continuing to repair an old beater car rather than cut your losses and trade in or scrap it.
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