Sunk Cost Fallacy
Type: Cognitive Bias
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Definition
Continuing an endeavor because of previously invested resources (time, money, effort) — even when quitting is the rational choice.
Sunk costs are gone. Irrecoverable. But we let them dictate future decisions.
Why It Matters
Projects: “We’ve come this far…” — Even when failure is certain. Relationships: Years invested ≠ reason to stay unhappy. Investing: Holding losing stocks to “break even.” Entertainment: Finishing a bad movie because you paid for it.
The Logic Error
| Correct | Incorrect |
|---|---|
| ”What are my options NOW?" | "I can’t waste what I already spent” |
| Future costs/benefits | Past costs (already gone) |
| Marginal value | Total investment |
Examples
- Concorde fallacy — UK/France kept funding the jet because they’d spent billions
- Iraq War — “We can’t leave after so many died”
- Careers — Staying in hated field because of degree
- Dinner — Finishing food you’re full from
Fighting It
- Ignore sunk costs — They’re gone. Period.
- Fresh start test — “If I were starting today, would I…?”
- Separate decision — Past spending ≠ future spending
- Opportunity cost — What else could you do with time/money?
Related Biases
- Loss Aversion — Quitting feels like losing
- Status Quo Bias — Change feels like waste
- Commitment Escalation — Doubling down on bad bets
Audio
Podcast episode: Sunk Cost Fallacy
Part of the Cognitive Bias Reference