Imagine you are walking along a path, dropping $100 bills every step of your way. If there is no way for you to turn back and pick up those $100 bills, then it is sunk. Whether you dropped 1 or 1000 of them does not matter. You only need to decide should I continue to drop them or not as I move forward. Decision making is about picking the best option among many, the best that delivers you maximum value. In business scenarios the value is hard number and is probably based on some Excel model. But in consumer scenarios the value is more likely perceived value, that is not objective or common to all.
Here is a nice blog post by Seth Godin on Sunk costs. There is one different explanation I would like to give to his example of selling Bruce Springsteen tickets for $500.
You have tickets to the Springsteen concert. They were really hard to get. You spent four hours surfing StubHub until you found the perfect seats for $55 each.
On your way into the event, a guy offers you $500 cash for each ticket. Should you sell?
It turns out the amount of time you spent getting the tickets is irrelevant. If you wouldn’t be willing to PAY $500 for these tickets (and you weren’t, or you would have) then you should be willing to sell them for $500.
It is true that the time you spent is irrelevant. But as the Duke football ticket experiment by Dan Ariely shows, ownership increases how much we value our possessions. This is called endowment effect. People tend to value more what they own. It is not the sunk cost that is driving them to not sell the$55 tickets for $500 it is probably they value it more. So they are making a rational decision, not considering sunk costs, picking the option that delivers them maximum value.