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by Foundation for Economic Education

1. Julia started the video with a scenario about walking to the store. “Imagine that you're going to the store and you're halfway there when you realize, ‘Oh wait, the store is actually closed today.’ But you figure, ‘Well, I've already come ten blocks. I might as well just go all the way to the store, you know, so that my ten blocks of walking won't have been wasted.’” What is the sunk cost in this scenario?

2. What did Julia offer as a psychological reason why we might commit the sunk cost fallacy?

EoE: 3.4.Aa - The Sunk Costs Fallacy

Committing the sunk cost fallacy simply means that one has interpreted a sunk cost in the same way as an opportunity cost, when the two are fundamentally different. In the following video, Julia Galef explains why this is an error and gives a few examples of how we might commit the sunk cost fallacy in our day-to-day lives. This video is included as part of a 40-lesson course on the Economics of Entrepreneurship available now for teachers and students at no charge at FEE.org/Courses.

from The Sunk Costs Fallacy (2016)
Creator: Big Think
Posted by Foundation for Economic Education
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