Rick finds a great Internet deal on an all-inclusive vacation rental in the Bahamas for $1,200 and immediately pays a $1,000 nonrefundable deposit to reserve the trip. He later learns that the dates for the trip are right in the middle of hurricane season, when the weather is likely to be gloomy and potentially dangerous weather. Rick decides he cannot waste the $1,000 he already paid and takes the trip anyway. While sitting in the rain, miserable, Rick realizes he should have:

Question

Quizplus · Accepted Answer

Rick should have considered the $1,000 deposit as a sunk cost, which is a cost that has already been incurred and cannot be recovered. Making decisions based on sunk costs can lead to irrational decision-making, as it did in Rick's case. The rational choice would have been to ignore the sunk cost and make a decision based on the current situation, which might have led him to skip the trip to avoid the bad weather.

Rick Finds a Great Internet Deal on an All-Inclusive Vacation