Carl recently bought a used car-and it's a lemon.He has spent thousands of dollars on repairing the car,and this week,the mechanic told him it needs a new radiator.Carl thinks about how much money he has put into the car and thinks that,because he has invested so much money in repairs,he'd be better off just making the repair as opposed to spending money to buy a new car.Carl is a victim of
A)overconfidence.
B)the sunk-cost fallacy.
C)opportunity costs.
D)hindsight bias.

Question

Quizplus · Accepted Answer

Carl is a victim of the sunk-cost fallacy, which is the tendency to continue with a certain course of action because of the investment one has already made, regardless of whether it is the best decision moving forward. In this case, Carl is continuing to repair his used car because he has already invested a lot of money into it, even though it may not be the best financial decision in the long term.

Carl Recently Bought a Used Car-And It's a Lemon