1.
Do sunk costs and their relevance pose problems for decision makers?
Do sunk costs and their relevance pose problems for decision makers?
Solution
The Sunk costs are those costs which are already being incurred and cannot be recovered, while
the other concept is prospective costs which shall be incurred in the future.
Both the Sunk Cost as well as the Propsective Cost can be fixed or either varibale.
While making decision of incuring the prospective cost, the sunk costs should be taken into
consideration, as those are already sunk.
But they generally affect the decision making as the humans are risk averse and since they have
expereince a loss they may act in a different manner.
Hence if one has faced a loss in past, it may affect the future decision making.