Sunk Cost Fallacy
Cognitive BiasDecision MakingBehavioral Economics
The Sunk Cost Fallacy is the tendency to continue investing in a failing endeavor because of previously invested resources.
Introduction
The Sunk Cost Fallacy is the tendency to continue investing in a failing endeavor because of previously invested resources.
Core Concepts
- Irrecoverable Costs: Past expenses should not influence future decisions.
- Cognitive Commitment: Emotional attachment to prior investments.
- Rational Evaluation: Focusing on future benefits instead of past losses.
Applications
- Personal finance for making rational spending decisions.
- Business strategy to pivot away from failing projects.
Related Resources
- Tools: Cost-benefit analysis templates.
- Book: "Thinking in Bets" by Annie Duke.