![]() Sunk cost fallacy occurs when you make decisions that are based on the emotional investments that you have already made. It also says that the psychological drive to recover things that you lose is a strong motivator that can cause you to make bad decisions. Sunk cost fallacy psychology is based on the idea that people have stronger emotional connections to things they've lost (including time) than they do to the things they've gained. ![]() In this case, it would be best to skip the concert, even though you paid for it. If you are going to be miserable at the concert because you are sick, you're not going to get anything out of the money you spent anyway. While you did spend the money already, you can't get it back whether you go to the concert or not. If you do this, you have fallen for the sunk cost fallacy. Even though you don't feel well, you may decide to go to the concert anyway to avoid thinking that you wasted your money. Say you bought tickets to see a band play in your town, but you wake up sick on the day of the concert. Sunk cost fallacy could also happen in your personal life. The money that was spent cannot be recovered, so it shouldn’t be a factor in the business’s future decisions if two years later it is best to spend more money on an entirely new system. ![]() For example, a company may have spent a hundred thousand dollars to upgrade its computer system. In business and economics, a “ sunk cost” refers to any cost that has been paid and cannot be recovered. Allow yourself to make mistakes and admit them. Keep track of your investments, be it time or money, and be ready to cut your losses when the numbers don’t look good.
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