Strategy with Sunk Costs

Article type: Research Article

Authors: Singer, Alan E.

Affiliations: Department of Management, University of Canterbury, Christchurch, New Zealand, Tel: + 64 3 667-001; fax: + 64 3 364 2020

Abstract: The conceptual framework of Strategy-as-Rationality is applied to the strategic mystery of investment decisions involving sunk costs. The problem is isomorphic to that confronting a plurally-rational individual, who cannot be certain about the future but is reconsidering a partly-implemented personal plan. Normative, descriptive and prescriptive dimensions of this generic sunk cost problem are synthesized. The analyis is illustrated with reference to an unfinished hydroelectric scheme on the Danube river in Central Europe (Gabcikovo-Nagymarosz).

Keywords: Sunk costs, strategic investments, plural rationality, Danube-diversion

DOI: 10.3233/HSM-1993-12204

Journal: Human Systems Management, vol. 12, no. 2, pp. 97-113, 1993