What is a suggested approach to avoid the Sunk Cost Trap?

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Study for the University of Central Florida QMB3602 Business Research for Decision Making Exam 1. Prepare with detailed questions and in-depth explanations to excel in your test! Enhance your decision-making skills effectively.

The suggested approach to avoid the Sunk Cost Trap is to accept that mistakes happen and move on. The Sunk Cost Trap occurs when individuals or organizations continue to invest in a decision based on the cumulative prior investment, rather than on future potential benefits. By acknowledging that mistakes can occur, decision-makers can allow themselves to pivot or make changes without the burden of past investments influencing their current choices.

Moving on means reassessing the current situation based on future outcomes and opportunities rather than being stuck in the past. This perspective enables businesses to refocus their efforts and resources on more promising avenues rather than being hindered by emotional attachments to previous investments that may not lead to favorable outcomes.

In contrast, other approaches such as doubling down on existing investments or sticking to a previously made plan can exacerbate the impact of the Sunk Cost Trap by perpetuating poor decision-making based on past losses. Consulting with other stakeholders may provide additional perspectives, but the essential strategy remains to recognize when to change course without being weighted down by prior commitments.