Suppose you’re absolutely confident that you’ve misplaced a $5 bill somewhere in your neighborhood. How long will you search for that money? Explain your answer, using the concept of sunk costs in your explanation.

Question

minimato · Answer

I don't really understand this question, could someone explain it to me. How would the concept of sunk costs even apply to this situation? This is one of those "no wrong answers" kind of questions, but it doesn't make much sense to me. Is the $5 supposed to be a past cost of a decision?

anonymous · Answer

Sunk cost is cost that can't be recovered.
I think this example isn't a very good one for sunk cost...
You will search for the $5 depends on a few things: How much it actually worth to you (if you are a kid and have no income, $5 can mean quite a bit), How many people are in the neighborhood, How long has it been since you lost it,... 
Or you'll just accept it has been lost and move on. (that's realizing sunk cost)

minimato · Answer

@nphuongsun93 Okay thanks! After spending an awful lot of time thinking about it, I think I got it. And I agree, this is not a good example to use for sunk cost