Question

Think about an example of a sunk cost in your life. Describe it and then explain how you might use logic to talk yourself out of “throwing good money/time/energy after bad” the next time you’re confronted with such a situation. (THIS IS CRITICAL THINKING!!!!)

Answer 1

A sunk cost, sometimes called a retrospective cost, refers to an investment already incurred that can't be recovered.

Examples of sunk costs in business include marketing, research, new software installation or equipment, salaries and benefits, or facilities expenses.

Imagine that you bought a concert ticket a few weeks ago for $50. On the day of the concert, you feel sick and it’s raining outside. You know that traffic will be worse because of the rain and that you risk getting sicker by going to the concert. Although it seems as though the current drawbacks outweigh the benefits, why are you still likely to choose to go to the concert?

This is known as the sunk cost fallacy. We are likely to continue an endeavor if we have already invested in it, whether it be a monetary investment or the effort that we put into the decision. That often means we go against evidence that shows it is no longer the best decision, such as sickness or weather affecting the event

Answer 2

An example of a sunk cost in my life is a gym membership that I signed up for but never used. I paid for the membership upfront, but I never went to the gym and ended up wasting the money. To talk myself out of throwing good money after bad the next time I'm confronted with such a situation, I would use logic to evaluate the cost-benefit of the situation. I would ask myself if the cost of the item or service is worth the potential benefit I would receive from it. If the cost outweighs the benefit, then I would not make the purchase.