Sunk cost fallacy is a cognitive bias refers to the phenomenon where people continue to invest resources (e.g., time, money, effort) in a failing project or situation in the belief that they have already invested too much to quit.

Reasons for sunk cost fallacy:

• Confirmation bias: The tendency to favor information that confirms our existing beliefs and ignore information that contradicts them.
• Avoidance bias: The tendency to avoid situations that make us feel uncomfortable or cause us to experience negative emotions.
• Ego depletion: The feeling of satisfaction we get from completing a task or achieving a goal, even if the task is not particularly enjoyable.

Examples of sunk cost fallacy:

• Continuing to invest in a stock or investment that is losing value.
• Spending money on a movie ticket even if you don’t enjoy the movie.
• Continuing to maintain a relationship with someone who is mistreating you.

How to overcome sunk cost fallacy:

• Identify your sunk costs: Make a list of the resources you have invested in a project or situation.
• Consider the opportunity cost: Weigh the potential benefits of abandoning the project or situation against the costs of continuing to invest.
• Be willing to walk away: If the project or situation is not worth continuing, don’t be afraid to cut your losses and move on.

Additional resources:

• Sunk Cost Fallacy
• Sunk Cost Fallacy Explained