Comments on: Understanding sunk costs http://mindyourdecisions.com/blog/2007/08/22/the-idea-of-sunk-costs/ Articles on game theory and personal finance Wed, 08 Feb 2012 16:47:00 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Ignoring Stuff and People « ignorance and uncertainty http://mindyourdecisions.com/blog/2007/08/22/the-idea-of-sunk-costs/comment-page-1/#comment-8458 Ignoring Stuff and People « ignorance and uncertainty Thu, 19 May 2011 05:46:24 +0000 http://mindyourdecisions.com/blog/2007/08/22/the-idea-of-sunk-costs/#comment-8458 [...] to persist in pursuing the goal. There’s a nice treatment of this on the less wrong site. The Mind Your Decisions blog also presents a few typical examples of the sunk cost fallacy in everyday life. The main point [...] [...] to persist in pursuing the goal. There’s a nice treatment of this on the less wrong site. The Mind Your Decisions blog also presents a few typical examples of the sunk cost fallacy in everyday life. The main point [...]

]]> By: The strategy of eating leftover food - Mind Your Decisions http://mindyourdecisions.com/blog/2007/08/22/the-idea-of-sunk-costs/comment-page-1/#comment-6373 The strategy of eating leftover food - Mind Your Decisions Thu, 11 Mar 2010 01:21:17 +0000 http://mindyourdecisions.com/blog/2007/08/22/the-idea-of-sunk-costs/#comment-6373 [...] My money or not I know it shouldn’t matter if I bought the food or not. This is evident from the idea of sunk costs. [...] [...] My money or not I know it shouldn’t matter if I bought the food or not. This is evident from the idea of sunk costs. [...]

]]> By: Nazeer http://mindyourdecisions.com/blog/2007/08/22/the-idea-of-sunk-costs/comment-page-1/#comment-6321 Nazeer Sat, 13 Feb 2010 03:50:41 +0000 http://mindyourdecisions.com/blog/2007/08/22/the-idea-of-sunk-costs/#comment-6321 Yeh! now understand the value behind the term 'sunk cost' enjoyed every comments! My version: Sunk cost is like an expensive dating. Only at the end you realise that you made a wrong choice! However, experience is more valuable which will help you to decide on a perfect date next time! I guess we should be emtionally stable and convert negetive emotions to a positive future! Yeh! now understand the value behind the term ‘sunk cost’ enjoyed every comments!
My version:
Sunk cost is like an expensive dating. Only at the end you realise that you made a wrong choice! However, experience is more valuable which will help you to decide on a perfect date next time! I guess we should be emtionally stable and convert negetive emotions to a positive future!

]]> By: Presh http://mindyourdecisions.com/blog/2007/08/22/the-idea-of-sunk-costs/comment-page-1/#comment-138 Presh Thu, 06 Sep 2007 20:50:36 +0000 http://mindyourdecisions.com/blog/2007/08/22/the-idea-of-sunk-costs/#comment-138 @Joon: I see your point that we continually have new expenses that become "sunk" so we stop thinking about older ones. I'm not sure about your distinction from investments and sunk costs. A sunk cost IS an investment; it's the portion of an investment that you cannot recover. So for instance, if you buy a stock and it drops 50%, the loss is a a sunk cost. You should not hold on to the stock since you emotionally feel bad selling at a loss. You should only hold on to it if it holds the best investment return (after trading commissions) going forward. Otherwise, sell, sell, sell. @Joon: I see your point that we continually have new expenses that become “sunk” so we stop thinking about older ones.

I’m not sure about your distinction from investments and sunk costs. A sunk cost IS an investment; it’s the portion of an investment that you cannot recover. So for instance, if you buy a stock and it drops 50%, the loss is a a sunk cost.

You should not hold on to the stock since you emotionally feel bad selling at a loss. You should only hold on to it if it holds the best investment return (after trading commissions) going forward. Otherwise, sell, sell, sell.

]]> By: Joon http://mindyourdecisions.com/blog/2007/08/22/the-idea-of-sunk-costs/comment-page-1/#comment-120 Joon Thu, 06 Sep 2007 18:18:05 +0000 http://mindyourdecisions.com/blog/2007/08/22/the-idea-of-sunk-costs/#comment-120 I particularly enjoyed this post because of the fact that it required me to read the first sentence several times to reflect on various sunk costs. I have found a large portion of my finances are governed by sunk costs, and in fact many of them are poor decisions. This is significant, yet insignificant when you consider that there will be a sunk cost in the relatively near future impacting every aspect of my life to the point that everything else pales in comparison. And if you know what I mean, I pose another question: At what point does a sunk cost become an investment? Or are they not mutually exclusive? I particularly enjoyed this post because of the fact that it required me to read the first sentence several times to reflect on various sunk costs.

I have found a large portion of my finances are governed by sunk costs, and in fact many of them are poor decisions. This is significant, yet insignificant when you consider that there will be a sunk cost in the relatively near future impacting every aspect of my life to the point that everything else pales in comparison.

And if you know what I mean, I pose another question:
At what point does a sunk cost become an investment?

Or are they not mutually exclusive?

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