Term of the Day: Sunk Cost Trap

Sunk cost in economics is any past cost that has been already been paid and cannot be recovered.

Individuals and businesses fall into a sunk cost trap when they base their decisions on past behavior and a desire not to waste time or money they have already spent, instead of cutting their losses and making the decision that would give them the best outcome going forward.

For example, your business is loosing money but you don't want to give up because of the time, effort and money you had already put in it or going to a concert even if you are sick because you don't want to waste your money.

So don't be a victim of sunk cost fallacy. "Failure doesn't mean the game is over, it means try again with experience."

Sources: Investopedia, life hack

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