An Introduction to sunk cost and self management

Zhao Xiaojian

Associate Professor, School of Management and Economics, The Chinese University of Hong Kong, Shenzhen

Research Interest: contract theory and its applications, behavioral and experimental economics, language and economics

SME Vision is a video program produced by School of Management and Economics (SME) of The Chinese University of Hong Kong, Shenzhen. In this program, SME News Service will invite professors from SME to introduce the Science of Management and Economics, and let more people to learn about it. In these videos, professors will share their knowledge on the topics they have chosen.

Sunk cost is the cost that has been paid but is not recoverable in economic and business decisions, such as time and effort, which we commonly refer to as “sunk cost”. The mainstream economists generally tell us that as rational people, we should not consider sunk cost when making decisions and should let the past go. However, there is a discrepancy between what people should do and what they actually do.

A paper on the sunk cost effect by Professor Xiaojian Zhao, co-authored with Professor Fuhai Hong (Lingnan University) and Professor Wei Huang (Wuhan University) will be published in Management Science. In this SME Vision, Professor Xiaojian Zhao will briefly explain the ins and outs of the concept of "sunk cost" and the main contribution of the forthcoming paper. We believe that after watching this SME Vision, we can get a deeper understanding of the concept of "sunk cost", which is basic but of great importance.