What category does Sunk Cost Effect belong to?

Sunk Cost Effect belongs to the "Concepts" category in personal knowledge management and productivity.

What are the key topics related to Sunk Cost Effect?

Key topics related to Sunk Cost Effect include: psychology, decision-making, cognitive-biases, economics, rationality.

Sunk Cost Effect

Q: What are alternative names for Sunk Cost Effect?

Sunk Cost Effect is also known as: Sunk cost fallacy, Escalation of commitment, Concorde fallacy.

The tendency to continue an endeavor because of past investment, regardless of future value.

Also known as: Sunk cost fallacy, Escalation of commitment, Concorde fallacy

Category: Concepts

Tags: psychology, decision-making, cognitive-biases, economics, rationality

Explanation

The sunk cost effect (or sunk cost fallacy) is the tendency to continue an endeavor because of past investment (time, money, effort) rather than future returns. Rationally, past costs are irrelevant to future decisions - only future costs and benefits matter. But psychologically, we: feel waste-aversion (not wanting past investment to be 'for nothing'), seek to justify past decisions, and escalate commitment to prove original choice was correct. Examples include: finishing a bad book because you started it, staying in bad relationships because of years invested, and continuing failing projects because of resources already spent. The fallacy leads to: poor resource allocation, delayed pivots, and accumulated losses. Overcoming it requires: focusing on future value, accepting sunk costs as sunk, and asking 'knowing what I know now, would I start this?' If no, exit regardless of past investment. For knowledge workers, recognizing sunk costs helps: make better project continuation decisions, exit failing ventures earlier, and avoid throwing good resources after bad.

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