Sunk cost fallacy
Also known as: Escalation of commitment, Concorde fallacy
Throwing good money after bad because of what has already been spent.
What it means
The sunk cost fallacy is the tendency to continue an endeavor because of cumulative prior investment — money, time, or effort that cannot be recovered — rather than because of its prospective future value. Rational choice should be forward-looking and ignore unrecoverable past costs, but loss aversion makes abandoning the project feel like crystallizing a loss, and the desire to appear consistent and to avoid waste keeps people committed. When this commitment grows over successive decisions it becomes escalation of commitment, in which decision-makers pour ever more resources into a failing course to justify what they have already sunk. The fallacy is amplified by personal responsibility for the original decision and by public visibility, both of which raise the psychological cost of quitting. Interestingly, it appears muted in young children and some animals, suggesting it is partly learned through cultural norms about waste. It matters because it sustains doomed projects, bad relationships, and stalled policies long past the point where a clear-eyed look forward would counsel exit.
Examples
Sitting through a bad movie 'because I paid for the ticket,' or funding a failing project for another year to justify last year's spending.
Someone stays in a relationship that stopped working two years ago because leaving would mean 'wasting' the seven years already invested — years that are gone whichever choice they make.
A student two years into a degree they now dislike keeps going 'to finish what I started,' when the only live question is whether the next two years are worth it.
First described in Arkes & Blumer (1985).