What is the sunk cost fallacy?
We've all been there before, sitting in the back of the theater watching a terrible movie and convincing ourselves to stay just because the ticket was expensive. Or getting sick the day of a concert we had bought tickets for and deciding to go even though we’d be happier resting at home.
These are both instances of what psychologists call the sunk cost fallacy, defined as the tendency to continue along a course of action once time, money or effort have been invested. A fully logical person would only make decisions based on the costs and benefits of each choice in the moment. Will I be happier staying at the movie right now or going somewhere else downtown? Will I really enjoy spending the whole day at this concert when I feel like resting? A decision honoring sunk costs would factor in these investments of time and money, potentially leading to a worse outcome.
How does the sunk cost fallacy hurt decision making? Is it always a bad thing? What can we do to make better decisions? Continue your journey to learn more.
Quick overview of my research:
I surveyed Santa Clara University students to learn more about how students make academic and social decisions. Although people like to think that they make rational choices and only consider the future costs and benefits of a decision, I found that students heavily weighted past investments of time, money and effort in their choices.
Additionally, I discovered that older students and engineering students were more likely to make better decisions than the general population of students surveyed. As we grow older, increase our mindfulness and notice our often-subconscious decision-making processes, we can make better decisions that increase our well-being.
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