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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you buy a cheeseburger and drive home to eat it. you take a bite. it’s disgusting. but you feel the need to eat all of it anyway or you’re losing money. but, you’re not losing money, the money is gone. that’s a sunk cost. sunk cost fallacy is thinking you lose less money by eating the rest of the bad cheeseburger.
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