When families go to the same resort year after year, and get to know and like both the resort employees and friends in the nearby town, they may be less sensitive to price increases at the resort due to the:
A) Sunk investment effect
B) Price quality effect
C) External environment effect
D) Substitute awareness effect

Question

Quizplus · Accepted Answer

The sunk investment effect refers to the tendency for individuals to become less sensitive to future costs because they have already invested time, money, or effort into a particular activity or service. In this case, if families have been going to the same resort year after year and have gotten to know the employees and nearby town, they have likely already invested time and effort into building those relationships and may be less sensitive to price increases at the resort.

When Families Go to the Same Resort Year After Year