Tuesday, September 8, 2015

A manager should ignore sunk costs during decision-making - and also sunk time

I wanted to withdraw some money a few days ago and so I reached my bank's branch. There I saw a long queue and estimated that I would have to wait around 15-20 minutes in the queue for my turn to come. I wondered if I should return and instead withdraw the same amount from an ATM.

Just then the MBA learning - sunk costs should never be considered in managerial decision-making - occured to me and I decided to stay at the branch and wait in the queue. Why? Because going to the ATM and withdrawing money from it would've cost me about 20-25 minutes. Staying in the queue would've cost me 15-20 minutes. The better decision is obvious, since the time I have already spent to reach the bank branch is now sunk and thus shouldn't affect my subsequent choice.

No comments:

Post a Comment