cradleandshoot wrote: ↑Sun Jan 21, 2024 2:26 pm
Your griping at the wrong guy. One of our local TV investigative reporters did a pretty lengthy piece explaining what they discovered about the closings. There must be a conspiracy among those 3 drug chains lying about why they closed down all of these stores. Of course I could still be correct that they are simply taking a nap and have overslept. Why was that young lady lying to my wife and I about the never ending theft problem at her store. Damn her. Damn her all to hell. The wife and I are going to have a chat with her. She lied to us about all the merchandise stored under lock and key. Maybe Walgreen simply can't afford all of those locks they are buying? Unless maybe they have started stealing the locks too.
Just out of curiosity TLD what would be the logic of Walgreens, CVS and Rite AId to spend mega bucks to construct these brand new stores simply to shut them down in under 5 years? I'm not a business wiz but it sure doesn't make a lot of sense to me. I know any business worth its salt investigates the market first before investing the money, time and effort to build the store in the first place. I know a pizza store owner fairly well who does many months of due diligence looking for locations, traffic patterns and other pizza joints near buy. He won't plunk down dollar number one until he is assured the new store will be profitable. Maybe there is a tax write off for these chains or maybe their management is simply flat out stupid.
Dude you start with and conclusion then expose yourself by acknowledging all the things about it you don’t understand.
Here’s one: Sunk cost
https://en.m.wikipedia.org/wiki/Sunk_co ... is%20taken.
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Sunk cost
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"Sunk Costs" redirects here. For the Better Call Saul episode, see Sunk Costs (Better Call Saul).
In economics and business decision-making, a sunk cost (also known as retrospective cost) is a cost that has already been incurred and cannot be recovered.[1][2] Sunk costs are contrasted with prospective costs, which are future costs that may be avoided if action is taken.[3] In other words, a sunk cost is a sum paid in the past that is no longer relevant to decisions about the future. Even though economists argue that sunk costs are no longer relevant to future rational decision-making, people in everyday life often take previous expenditures in situations, such as repairing a car or house, into their future decisions regarding those properties.
Bygones principle
Fallacy effect
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See also: Fail fast (business)
The bygones principle does not always accord with real-world behavior. Sunk costs often influence people's decisions,[7][14] with people believing that investments (i.e., sunk costs) justify further expenditures.[16] People demonstrate "a greater tendency to continue an endeavor once an investment in money, effort, or time has been made".[17][18] This is the sunk cost fallacy, and such behavior may be described as "throwing good money after bad",[19][14] while refusing to succumb to what may be described as "cutting one's losses".[14] People can remain in failing relationships because they "have already invested too much to leave". Other people are swayed by arguments that a war must continue because lives will have been sacrificed in vain unless victory is achieved. Individuals caught up in psychologically manipulative scams will continue investing time, money and emotional energy into the project, despite doubts or suspicions that something is not right.[20] These types of behaviour do not seem to accord with rational choice theory and are often classified as behavioural errors.[21]
Rego, Arantes, and Magalhães point out that the sunk cost effect exists in committed relationships. They devised two experiments, one of which showed that people in a relationship which they had invested money and effort in were more likely to keep that relationship going than end it; and in the second experiment, while people are in a relationship which they had invested enough time in, they tended to devote more time to the relationship.[22] It also means people fall into the sunk cost fallacy. Although people should ignore sunk costs and make rational decisions when planning for the future, time, money, and effort often make people continue to maintain this relationship, which is equivalent to continuing to invest in failed projects.
According to evidence reported by De Bondt and Makhija (1988)[full citation needed], managers of many utility companies in the United States have been overly reluctant to terminate economically unviable nuclear plant projects. In the 1960s, the nuclear power industry promised "energy too cheap to meter". Nuclear power lost public support in the 1970s and 1980s, when public service commissions around the nation ordered prudency reviews. From these reviews, De Bondt and Makhija find evidence that the commissions denied many utility companies even partial recovery of nuclear construction costs on the grounds that they had been mismanaging the nuclear construction projects in ways consistent with throwing good money after bad.[23]
The sunk cost fallacy has also been called the "Concorde fallacy": the British and French governments took their past expenses on the costly supersonic jet as a rationale for continuing the project, as opposed to "cutting their losses".
There is also evidence of government representatives failing to ignore sunk costs.[21] The term "Concorde fallacy"[24] derives from the fact that the British and French governments continued to fund the joint development of the costly Concorde supersonic airplane even after it became apparent that there was no longer an economic case for the aircraft. The British government privately regarded the project as a commercial disaster that should never have been started. Political and legal issues made it impossible for either government to pull out.[9]
The idea of sunk costs is often employed when analyzing business decisions. A common example of a sunk cost for a business is the promotion of a brand name. This type of marketing incurs costs that cannot normally be recovered. It is not typically possible to later "demote" one's brand names in exchange for cash. A second example is research and development (R&D) costs. Once spent, such costs are sunk and should have no effect on future pricing decisions[citation needed]. A pharmaceutical company's attempt to justify high prices because of the need to recoup R&D expenses would be fallacious. The company would charge a high price whether R&D cost one dollar or one million. R&D costs and the ability to recoup those costs are a factor in deciding whether to spend the money on R&D in the first place.[25]
Dijkstra and Hong proposed that part of a person's behavior is influenced by a person's current emotions. Their experiments showed that emotional responses benefit from the sunk cost fallacy. Negative influences lead to the sunk cost fallacy. For example, anxious people face the stress brought about by the sunk cost fallacy. When stressed, they are more motivated to invest in failed projects rather than take additional approaches. Their report shows that the sunk cost fallacy will have a greater impact on people under high load conditions and people's psychological state and external environment will be the key influencing factors.[26]
The sunk cost effect may cause cost overrun. In business, an example of sunk costs may be an investment into a factory or research that now has a lower value or none. For example, $20 million has been spent on building a power plant; the value now is zero because it is incomplete (and no sale or recovery is feasible). The plant can be completed for an additional $10 million or abandoned and a different but equally valuable facility built for $5 million. Abandonment and construction of the alternative facility is the more rational decision, even though it represents a total loss of the original expenditure—the original sum invested is a sunk cost. If decision-makers are irrational or have the "wrong" (different) incentives, the completion of the project may be chosen. For example, politicians or managers may have more incentive to avoid the appearance of a total loss. In practice, there is considerable ambiguity and uncertainty in such cases, and decisions may in retrospect appear irrational that were, at the time, reasonable to the economic actors involved and in the context of their incentives. A decision-maker might make rational decisions according to their incentives, outside of efficiency or profitability. This is considered to be an incentive problem and is distinct from a sunk cost problem. Some research has also noted circumstances where the sunk cost effect is reversed; that is, where individuals appear irrationally eager to write off earlier investments in order to take up a new endeavor.[27]
Plan continuation bias
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A related phenomenon is plan continuation bias,[28][29][30][31][32] which is recognised as a subtle cognitive bias that tends to force the continuation of a plan or course of action even in the face of changing conditions. In the field of aerospace it has been recognised as a significant causal factor in accidents, with a 2004 NASA study finding that in 9 out of the 19 accidents studied, aircrew exhibited this behavioural bias.[28]
This is a hazard for ships' captains or aircraft pilots who may stick to a planned course even when it is leading to fatal disaster and they should abort instead. A famous example is the Torrey Canyon oil spill in which a tanker ran aground when its captain persisted with a risky course rather than accepting a delay.[33] It has been a factor in numerous air crashes and an analysis of 279 approach and landing accidents (ALAs) found that it was the fourth most common cause, occurring in 11% of cases.[34] Another analysis of 76 accidents found that it was a contributory factor in 42% of cases.[35]
There are also two predominant factors that characterise the bias. The first is an overly optimistic estimate of probability of success, possibly to reduce cognitive dissonance having made a decision. The second is that of personal responsibility: when you are personally accountable, it is difficult for you to admit that you were wrong.[28]
Projects often suffer cost overruns and delays due to the planning fallacy and related factors including excessive optimism, an unwillingness to admit failure, groupthink and aversion to loss of sunk costs
Any idea what the baseline is for shrinkage before you lock the doors?
