Have you sat through an entire movie even though you knew you disliked it within the first thirty minutes? Have you ever gotten in a checkout line at a grocery store, noticed that another line is moving faster, and stayed in your original line? Have you ever ordered way too much food, and then forced yourself to eat every slice/dumpling/bite just because you had already paid for it?

If so, you’re falling victim to the sunk cost fallacy.

First, it’s important to define what we mean by “sunk cost.” A sunk cost is a cost that has already been incurred and cannot be recovered. In this case, a cost may not just refer to monetary value but also the emotional investment an individual has made on a decision.

The sunk cost fallacy is the phenomenon of making a decision based off of these sunk costs. The issue is that you don’t need to take these costs into account when making a choice as these costs have already been incurred. Instead, you should be making a decision in the interest of your future happiness or well being (and not considering the investment you have already made via sunk costs).

Imagine you have purchased a ticket to a concert. On the day of the concert, however, a friend tells you that the artist doesn’t perform well live, and you decide that you don’t really want to go to the concert at all. Now you have two choices:

  • Going to see a concert that you’re not going to enjoy; or
  • Skipping the concert to do something more enjoyable with your time.

Either way, you already bought the ticket to the concert and you can’t change that. The rational choice is the second option – you should do something that you know you’re going to enjoy (despite the fact that you already bought the ticket). However, most people would likely choose the first option – going to the concert because it seems like the right thing to do since you’ve already made the investment on the ticket. That’s the sunk cost fallacy.

Almost everyone suffers from the sunk cost fallacy, the question is can you avoid it now that you know that it exists?


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