sunk costs


Also found in: Medical.

Sunk costs

Costs that have been incurred and cannot be reversed.

Sunk Costs

Money that has already been spent. Sunk costs are important because a company may use, for example, an old piece of equipment to make a new product. In this case, sunk costs are positive because no further investment is required. On the other hand, a sunk cost may be negative; for example, that old piece of equipment may break down after its warranty has expired. This means that the owner will not recover the costs no matter what happens.

sunk costs

any expenditure on durable and specific FACTOR INPUTS, such as plant and machinery, that cannot be used for other purposes or easily be resold. Such sunk costs have no affect on MARGINAL COSTS and do not influence short-term output decisions.

The presence of sunk costs through investment in TRANSACTION-specific assets can affect the relative bargaining power of parties to a CONTRACT. See ASSET SPECIFICITY. See also OPPORTUNITY COST, BARRIERS TO EXIT.

References in periodicals archive ?
The study discovered that just a short period of intentional mindfulness nudged people to ignore sunk costs and make wiser decisions.
The sunk cost effect is often seen as an irrational decision-making bias (Navarro and Fantino 2009) because despite prior investments being "sunk" and having no impact on the success of continued investment, these sunk costs continue to impact decision making.
For years I've been reading that it's "the death of the high street" with more and more established retailers trading online and start-ups not considering the high street at all due to the risk faced in signing a lease and the sunk costs involved.
Forecast benefits and cost in each year not excluding sunk costs and including opportunity costs
Fourth, a consultation may lead to preventive changes--quitting smoking, behaviour modification, stopping unnecessary medications--that are positive investments, not sunk costs.
Although it is a market where the buyer exerts significant bargaining power, as there are multiple players offering solutions at competitive prices, yet it has low entry barriers for new players due to very limited government control and less initial sunk costs to operate.
In one online study, American participants reported about how much they typically focus on the present moment, and also read 10 sunk-cost scenarios--such as whether to attend a music festival that had been paid for when illness and bad weather made enjoyment unlikely--and then reported how much they would let go of sunk costs in each of them.
In one online study, participants reported about how much they typically focus on the present moment and also read 10 sunk-cost and then reported how much they would let go of sunk costs in each of them.
This inquiry leads to a conclusion that markets with fixed costs are contestable, but markets with sunk costs are not.
In Bresnahan and Reiss (1994), the entry threshold is defined as the minimum level of demand for a given level of per patient profit such that aggregate profits cover both ongoing fixed costs of operation and the sunk costs of entry.
These acquisitions are conducted at historically low prices and capitalise on the considerable sunk costs invested by previous owners.
They explain the four phases of project management, and how to choose the right team, manage uncertainty, perform a project premortem, avoid "scope creep," set priorities, boost productivity with time-boxing, schedule the work, plan the launch, focus on critical tasks and mapping out a logical sequence, run effective meetings, manage big projects and their risks, revise the plan, manage people problems, avoid chasing after sunk costs, use Gantt and PERT (Performance Evaluation and Review Technique) charts, get disruptive team members on board, keep stakeholders apprised, evaluate the project's success, and capture and use lessons learned.