Sunk Cost

Definition

Sunk cost refers to money, time, or effort that has already been spent on a particular endeavor and that cannot be recovered. Economic principles dictate that sunk costs should not be considered when making decisions about whether to continue one's present course of action or to divert resources elsewhere. Such decisions rationally should be based only on consideration of the anticipated costs and benefits of current options.

For example, after 6 months of exclusively dating one man, a woman ponders whether it makes sense to maintain the relationship. Upon weighing the positives and negatives, she comes to the realization that continuing to date this same man will not allow her to achieve the quality of relationship she desires. That being the case, the clearly rational thing ...