Sunk Cost Fallacy

Definition

The sunk cost fallacy refers to the tendency for people to continue investing time, money, or effort into something simply because they have already invested in it, even when continuing would not be beneficial. It is based on the flawed reasoning that since they have already spent resources on something, they should keep going instead of cutting their losses.

Related terms

Opportunity Cost: The potential benefit or value that is lost when choosing one option over another. For example, if you decide to study for an extra hour instead of going out with friends, your opportunity cost is the fun and socializing you could have had.

Confirmation Bias:

The tendency to favor information that confirms our preexisting beliefs or hypotheses while ignoring or downplaying contradictory evidence. It can lead us to make decisions based on incomplete or biased information.

Endowment Effect: The cognitive bias where individuals place higher value on items they own compared to identical items owned by others. It can influence decision-making when evaluating whether to sell an item at its market price or hold onto it due to personal attachment.