My university has made the first wave of personnel and program cuts to deal with its budget woes. The headline cut was the elimination of the 18 month old New Center, a downtown professional development center that also housed the MBA program. The New Center had lost $800k and $500k in its first two years of operation and thus contributed in a small but not insignificant way to the $4.8m and $5.4m(p) operating deficits of those years.

The business school dean (full disclosure: she is also my boss but I have no connection to the New Center or the MBA program) claims the Center is on track to make a significant amount of net revenue in the third year of operation. Of course, now they cut the program.

Question for discussion: Is the university guilty of sunk cost reasoning?