Sunk Cost Fallacy

Sunk Cost Fallacy

What is it?

The sunk cost fallacy is a cognitive bias where individuals continue investing in a project or decision based on the resources already invested, even when continuing to invest is no longer logical or rational.

The Sunk Cost Fallacy is a cognitive bias where people continue to invest time, money, or effort into a decision or project based on the amount they have already invested, rather than evaluating the current and future value of their investment. People tend to have a hard time letting go of their past investments, even if it's no longer the best course of action.

Here are two simple examples to help you understand the Sunk Cost Fallacy:

  1. Movie tickets: Imagine you bought a non-refundable movie ticket for $10. Halfway through the movie, you realize it's terrible, and you're not enjoying it at all. However, you decide to stay and watch the rest of the movie because you already paid for the ticket. This is an example of the Sunk Cost Fallacy, as you're continuing to invest time in something that isn't providing value simply because you've already spent money on it.

  2. Home renovation project: Suppose you started a home renovation project that you initially expected to cost $5,000. As the project progresses, unexpected issues arise, and the costs keep increasing. Even though the project has already cost you $15,000 and the final result might not be worth the extra expense, you d ...