Defining Sunk Costs

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Sunk costs are costs that are unrecoverable (i.e. nonrefundable) and represent past expenditures. These should not normally be taken into account when determining whether to continue a project or abandon it because they cannot be recovered either way. It is a common irrational instinct to count them, however. Terms related to Sunk Costs are Average Total Cost, Transaction Costs, and the Cost Curve.

Here Are a Few Starting Points for Research on Sunk Costs:

Books on Sunk Costs:

  • Sunk Costs and Market Structure
  • The Effects of Competition: Cartel Policy and the Evolution of Strategy and Structure in British Industry
  • Pushing the Numbers in Marketing: A Real-World Guide to Essential Financial Analysis

Journal Articles on Sunk Costs:

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