Table of ContentsView AllTable of ContentsHow It WorksExamplesWhen to Walk Away

Table of ContentsView All

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Table of Contents

How It Works

Examples

When to Walk Away

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The sunk cost fallacy is acognitive biasthat makes you feel as if you should continue pouring money, time, or effort into a situation since you’ve already “sunk” so much into it already. This perceived sunk cost makes it difficult to walk away from the situation since you don’t want to see your resources wasted.

When falling prey to sunk cost fallacy, “the impact of loss feels worse than the prospect of gain, so we keep making decisions based on past costs instead of future costs and benefits,” explainsYalda Safai, MD, MPH is a psychiatrist in New York City.

According to the National Institutes of Health (NIH), this leads to irrational,emotion-based decision making, causing you to spend additional resources on a dead end instead of walking away from the situation that’s no longer serving you.

Ahead, we’re discussing some of the dangers of falling into this cognitive bias and outlining some common scenarios where sunk cost fallacy can show up in your life.

10 Cognitive Distortions That Can Cause Negative Thinking

How the Sunk Cost Fallacy Works

While closing the chapter on the situation—despite how much you’ve spent—may conjure feelings of fear or nervousness, doing so actually opens you up to new situations that will serve you better.

It’s important to re-frame these sunk costs as just that: money already spent that cannot be recuperated. For clear and rationaldecision making, the amount you already spent must be viewed as irrelevant to what comes next.

Arrival Fallacy: Will Reaching a Goal Make You Happy?

How Sunk Cost Fallacy Shows Up in Our Lives

While the definition of sunk cost fallacy is often associated with actual financial costs—like putting hundreds or thousands of dollars into a car that still won’t run, for example—it can happen in any area of your life. You might see this cognitive bias crop up in your career, personal relationships, education, financial investments, and elsewhere.

Some specific examples might include:

Even large entities—such as governments, companies, and sports teams—are susceptible to the sunk cost fallacy. For example, they may continue to allocate more resources into projects, products, strategies, or programs that aren’t profitable or successful.

13 Types of Common Cognitive Biases That Might Be Impairing Your Judgment

How to Know When To Walk Away

There’s a fine line between knowing when to stay the course and when to walk away.

Also consider the following:

Yalda Safai, MD, MPH

9 Little Habits That Make You a Better Decision Maker

A Word From Verywell

Sunk cost fallacy can be tricky to wrap your head around, and it’s not without nuance. For more clarity in these complex decision-making moments, completely disregard how much you’ve already invested so that it doesn’t hold influence. Then, look at the facts.

Are you satisfied? Have you repeatedly been met with dead ends? Is there still potential for a positive outcome if you continue investing your resources and energy? What are the benefits of walking away and opening a new door? These are the factors that should influence your decision rather than any previously sunk costs.

Is Your Relationship Worth Saving?

2 SourcesVerywell Mind uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read oureditorial processto learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.“Sunk Cost Fallacy – How It Affects Career Decision-Making.” National Insititutes of Health.The psychology of sunk cost. (1985). Organizational Behavior and Human Decision Processes, 35(1), 124–140. doi:10.1016/0749-5978(85)90049-4

2 Sources

Verywell Mind uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read oureditorial processto learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.“Sunk Cost Fallacy – How It Affects Career Decision-Making.” National Insititutes of Health.The psychology of sunk cost. (1985). Organizational Behavior and Human Decision Processes, 35(1), 124–140. doi:10.1016/0749-5978(85)90049-4

Verywell Mind uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read oureditorial processto learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

“Sunk Cost Fallacy – How It Affects Career Decision-Making.” National Insititutes of Health.The psychology of sunk cost. (1985). Organizational Behavior and Human Decision Processes, 35(1), 124–140. doi:10.1016/0749-5978(85)90049-4

“Sunk Cost Fallacy – How It Affects Career Decision-Making.” National Insititutes of Health.

The psychology of sunk cost. (1985). Organizational Behavior and Human Decision Processes, 35(1), 124–140. doi:10.1016/0749-5978(85)90049-4

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