Imagine the following situations:
Steve and Alexis are that couple that have been together since High School but are not the right fit for each other anymore and fight all the time. When asked why they stay together if they are no longer happy, they almost instantly respond “if we break up now, we would have wasted all those years”, so they are still together, turning every couple outing into a Broadway show.
Kenji and Mark went for the first time to the trendiest restaurant in town. After paying an eye-watering amount for their food, the order arrives and they absolutely hate it, it is not to their liking at all. Kenji leaves almost half a plate, but Mark insists on finishing the whole thing, grimacing the whole time. When Kenji asks his buddy why he subjected himself to such suffering, he responds "after what we paid for it, I am finishing it no matter what”.
Arkes and Blumer (1985) define the sunk cost fallacy as the greater tendency to continue an endeavor once an investment in time, effort or money has been made. In layman's terms, it’s “when you throw good money after bad” (Haita-Falah, 2017). This irrational behavior can be observed in any human activity in which a substantial amount of psychic energy is invested. It is driven by a need for consistency since pulling the plug on a project means admitting a contradiction (Dobelli, 2013) and failure (in this regard, we can see that the sunk cost fallacy is closely related to loss aversion, which we will discuss in a future post).
Fans of the show Friends (NBC 1994-2004) will remember the episode where Monica (Courteney Cox) bought a very expensive, but very uncomfortable pair of boots, and refused to stop using them because of how much she paid for them. By the end of the episode, her boyfriend Chandler (Mathew Perry) had to carry her on his back because of how painful walking was. The size of the initial investment increases the chances of the individual of incurring in the irrational behavior (Garland and Newport, 1991).
If you find yourself in a situation such as this, e.g., a problematic relationship, a stressful job that you dislike, a bad investment, etc., Arkes and Blumer (1985) recommend that you consider the decision as if you were making it for the first time, without regard for past investments. It is important to note that jumping ship is not necessarily the best solution, so seek advice by consulting with someone who is not invested in the decision and can provide an objective perspective (Tykocinski & Ortmann, 2011).
In order to avoid being trapped in the sunk cost fallacy in the future, Rolf Dobelli (2013) suggests developing a set of criteria that are relevant to the decision and using them to guide your choices, rather than being swayed by past investments. In the same vein, establishing a pre-commitment or a set of rules for yourself before you make a decision will help you guide your behavior and help you avoid the sunk cost fallacy. (Tait & Miller Jr, 2019)
As a cognitive psychotherapist, my goal is to help individuals overcome cognitive biases like the sunk cost fallacy that can lead to irrational decision-making. By focusing on the present moment and developing strategies to avoid being trapped in this bias, my clients can make more informed and effective decisions. Cognitive therapy can provide individuals with the tools they need to recognize and overcome cognitive biases, leading to better mental health and improved decision-making in all areas of life.
If you find yourself struggling with the sunk cost fallacy or any other cognitive bias, I encourage you to seek help from a cognitive psychotherapist. Through therapy, you can learn to recognize and overcome these biases, leading to a happier and more fulfilling life. Together, we can work to build a brighter future, free from the constraints of cognitive biases.
Arkes, H. R., & Blumer, C. (1985). The psychology of sunk cost. Organizational behavior and human decision processes, 35(1), 124-140.
Dijkstra, K. A., & Hong, Y. Y. (2019). The feeling of throwing good money after bad: The role of affective reaction in the sunk-cost fallacy. PloS one, 14(1), e0209900.
Dobelli, R. (2013). The art of thinking clearly: better thinking, better decisions. Hachette UK.
Haita-Falah, C. (2017). Sunk-cost fallacy and cognitive ability in individual decision-making. Journal of Economic Psychology, 58, 44-59.
Tykocinski, O. E., & Ortmann, A. (2011). The lingering effects of our past experiences: The sunk‐cost fallacy and the inaction‐inertia effect. Social and Personality Psychology Compass, 5(9), 653-664.
Jhang, J., Lee, D. C., Park, J., Lee, J., & Kim, J. (2022). The impact of childhood environments on the sunk‐cost fallacy. Psychology & Marketing.
Tait, V., & Miller Jr, H. L. (2019). Loss aversion as a potential factor in the sunk-cost fallacy. International journal of psychological research, 12(2), 8-16.
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