Sunk Costs
Sunk costs are expenditures that have already been made and cannot be recovered regardless of future decisions. In rational decision-making, sunk costs should not influence forward-looking choices because they are bygones - only future costs and benefits matter.
Real World
The UK government spent over £100 billion on the HS2 rail project before scaling back the northern legs in 2023, yet ministers cited sunk costs as a reason to continue the remaining London–Birmingham section rather than cancelling entirely.
Exam Focus
If a question asks about rational decision-making, explain that sunk costs should be ignored — only marginal costs and benefits matter going forward.
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