“Sunk Cost” is the cost that have already incurred and cannot be recovered.
The money has already been spent and it cannot be recovered and hence it should not be a factor in future decisions.
The sunk cost effect is manifested in a greater tendency to continue an endeavor once an investment in money, effort, or time has been made. Individuals commit the sunk cost fallacy when they continue a behavior or endeavor as a result of previously invested resources which may be time, money or effort. (Arkes, H. R., & Blumer, C. (1985), The psychology of sunk costs. Organizational Behavior and Human Decision Processes, 35, 124-140.)
“Sunk Cost Fallacy” – People have stronger emotional connections to things they’ve lost and the urge to recover becomes a strong motivator; resulting in bad decisions. than they do to the things they’ve gained.
A simple example may be that you have spent time, effort and money to buy a Pizza. However, as you start eating it, you do not like the taste, not enjoying it, but you continue eating it and finish it since you have already spent your time, effort and money. So, not eating it may be a loss to you and hence you have fallen prey to “Sunk Cost Fallacy.”
Remember the Concord Project which lead to the term “Concorde Fallacy”. Its a great example. The Concorde Fallacy refers to the fact that the British and French governments continued to fund the aircraft even after it became apparent that there was no longer an economic case in it.
“The idea that you should continue to spend money on a project, product, etc. in order not to waste the money or effort you have already put into it, which may lead to bad decisions.” (https://dictionary.cambridge.org/dictionary/english/french)
Interested readers may visit the like to know more https://www.forbes.com/sites/jimblasingame/2011/09/15/beware-of-the-concorde-fallacy/#ae25b6a4e226
If we try to remember the effect of Sunk Cost Fallacy in our life, we may make better and fruitful decisions by exploring various available options; leading to a better utilization of our effort, time and money.