Psychologycalendar_todayLast updated: Apr 2026
What is Sunk Cost Fallacy?
/sʌŋk kɒst ˈfæləsi/
The sunk cost fallacy is the tendency to continue investing in something (time, money, effort) simply because you have already invested in it — even when cutting your losses is the rational choice.
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Everyday Example
Staying in a terrible film at the cinema because you already paid for the ticket is the sunk cost fallacy. The money is gone whether you stay or leave.
publicReal-World Application
“Companies routinely continue funding failing projects worth billions because executives cannot admit the initial decision was wrong — the classic "too big to fail" psychology.”
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Did you know?
The concept was formalised by economists Richard Thaler and Hal Arkes in the 1980s and helped establish the field of behavioural economics.
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Key Insight
Rational decisions should be based only on future costs and benefits, not past investments. The money/time you already spent is gone regardless of what you do next.
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