Sunk Cost Fallacy

The Sunk Cost Fallacy (also known as loss-aversion bias or Escalation of Commitment) is the throwing of good money (or effort) after bad to avoid facing up to a loss. In more formal terms, it results when the disutility of giving up an object is greater than the utility associated with acquiring it.^[1]

The decision to invest additional resources in a losing account, when better investments are available, is known as the sunk-cost fallacy, a costly mistake that is observed in decisions large and small.
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The sunk-cost fallacy keeps people for too long in poor jobs, unhappy marriages, and unpromising research projects. I have often observed young scientists struggling to salvage a doomed project when they would be better advised to drop it and start a new one. Fortunately, research suggests that at least in some contexts the fallacy can be overcome. The sunk-cost fallacy is identified and taught as a mistake in both economics and business courses, apparently to good effect: there is evidence that graduate students in these fields are more willing than others to walk away from a failing project.^[2]

#cognition #bias

See also:

• Anchoring Bias pulls an unknown value toward a known anchor