The sunk cost fallacy occurs when:
A) Losses hurt more than gains.
B) Gains or losses are compared to some reference point.
C) My utility function contains a bliss point.
D) I attempt to recover past costs by continuing an activity when there is a negative return.

Question

Quizplus · Accepted Answer

The sunk cost fallacy refers to the misconception where individuals continue an activity or endeavor due to previously invested resources (time, money, effort) despite the activity currently having a negative return. This fallacy ignores that past costs are irrecoverable and should not influence current decisions.

The Sunk Cost Fallacy Occurs When