The "sunk-cost fallacy" can lead to strategic insights

05/8/2013 | Kellogg Insight

The "sunk-cost fallacy," in which people throw good money rather than "waste" what they've already invested, can actually lead to smarter business decision-making, researchers say. Sunk costs serve as a reminder of the importance once attributed to a given outcome, helping people and organizations to persevere even when the reasons for doing so are obscured by more immediate pressures. That's particularly valuable after leadership transitions, when the precise logic behind a past decision isn't clear, researchers note.

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