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One argument is that the total revenue of Concorde did not cover its total costs, therefore the program should have been cancelled. But it's more subtle. One i
by yobbo 5y ago
One argument is that the total revenue of Concorde did not cover its total costs, therefore the program should have been cancelled.
But it's more subtle. One interpretation is that past costs don't matter, therefore decisions should be based on expected value of further investments. In a slightly round-about way, more "sunk costs" means higher leverage on future investments.
Whether it's a fallacy depends on high well you can estimate the future expected value, and how it depends on the current state.
- listenallyall 5y agoActually, understanding sunk costs may have saved the Concorde rather than killing it. I'm using entirely made up numbers just as an example -- let's say that halfway through development, new estimates of total project costs were $1 billion and total revenue was only projected to be $750 million. Shut it down? Nope, because the first half-billion has already been spent. At this point, the options are to stop and get zero, or spend the second half-billion to see a 750m return. So work continues.
- deleted 5y ago[deleted]
- chii 5y ago> spend the second half-billion to see a 750m return or spend the 2nd half-billion on another project that returns more than 750m. Decisions should be made holistically, and consider all opportunity costs.