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SUNK COST FALLACY IN FINANCE
This article analyzes the sunk cost fallacy concept in finance.
The psychological effects and how it can be prevented.
Sunk cost fallacy
is a cognitive bias that makes people continue to pour resources in a project or activity just because they have
already invested money, time and effort that cannot be recovered.
In investing or business, it's a cognitive bias where an investor or a business continues to fund a losing project or investment simply because they have already spent money and other resources that can't be recovered.
It affects one's financial decisions which creates an irrational habit and poor financial management.
Sticking with a bad decision and pouring more money into an investment simply because you have already spent money on it refusing to accept the loss.
Following one of the major investment project events that happened after the first commercial launch of the Concorde jet in January 1976.
The British and France governments invested 2.8 billion dollars into the supersonic Concorde jet(accumulation over the years), even though the project wasn't profitable, investments were still made on it for 27 long years until it was retired by France and British Airways…
