What is the definition of the sunk cost fallacy in psychology?

The sunk cost fallacy refers to the cognitive bias where individuals persist in investing resources into a project or decision, even when it is evident that it is destined for failure. This fallacy arises from the belief that the resources already invested necessitate continuation, despite the lack of rationality in doing so.

What are some examples of the sunk cost fallacy?

Examples of the sunk cost fallacy can be observed in both business and personal life. For instance, a company continuing to invest in an unprofitable project due to the resources already committed, or an individual attending a social event despite being ill because of the money spent on the ticket.

What cognitive biases underlie the sunk cost fallacy?

The sunk cost fallacy is influenced by cognitive biases such as loss aversion and commitment and consistency bias. Loss aversion amplifies attachment to past investments, making individuals hesitant to cut their losses. Commitment and consistency bias leads people to remain committed to a decision or project, even when it becomes clear it is no longer beneficial.

How can one break free from the sunk cost fallacy?

To overcome the sunk cost fallacy, individuals can employ strategies such as reframing decision-making to focus on future potential rather than dwelling on sunk costs. It's important to detach emotionally from past investments and seek unbiased input from others to gain fresh perspectives.

Are there any recommended resources for further understanding the sunk cost fallacy?

Two recommended resources for gaining a deeper understanding of the sunk cost fallacy are 'Thinking, Fast and Slow' by Daniel Kahneman and additional reading materials that explore cognitive biases and decision-making processes.

Sunk Cost Fallacy

Girl in black hair on a pier holding someone's hand.

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Girl with black hair and a red top sinking in blue-green water.

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