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If you’ve ever gotten deep into a task and
told yourself
that you’ve come this far, so you may as
well finish it,
you’ve fallen prey to the sunk cost effect,
more popularly known as the sunk cost fallacy.
This is when you continue with some sort of
effort
once you’ve already invested time, money,
or some other resource in it —
even if you don’t really want to go through
with it.
You’ve likely experienced this for yourself
in everyday life.
Like, you might have been more reluctant to
resign from your miserable job since you’d
been in it a few months.
Or maybe you’ve gone to
a concert you didn’t really want to since
you’d already paid for the tickets.
Maybe you’ve even stayed in a rocky relationship
since you’ve known the other person for years.
But while a lot of us have used sunk costs
to
justify our choices… it shouldn’t make
sense.
So, why do we do it?
Some of the research in this field
comes from behavioral economists.
They view people as rational decision-makers
who make choices based on the best use of
finite resources like limited time or money.
And they argue that a sunk cost is irrational.
It shouldn’t even be one of the factors
that influence your decision.
That’s because you’ve already expended
time, effort, or money
in it and it’s no longer an available resource
to choose from.
Yet people aren’t robots —
we’re not always flawlessly rational actors.
This is a thing we do all the time.
And the more we’ve invested in a sunk cost,
the more likely we are to commit to it.
A 1990 study in The Journal of Applied Psychology
examined this idea using 407 undergraduate
business students.
Researchers asked if the students would decide
to continue
a project when they found out they had been
outdone
by their competitor, given that some amount
of money
had already been spent on it.
The study found that the more money had already
been spent on the project, the more likely
people would
continue to spend money on it.
This tendency to keep committing to a less
desirable situation
is known as escalation of commitment, and
often goes
hand-in-hand with sunk cost effects.
So why exactly do we go all in on lost causes?
It turns out there’s not really one explanation
for why.
One major theory is based on self-justification.
It’s the idea that you commit to a sunk
cost because
you don’t want to admit that you made a
bad investment
— either to others or to yourself.
A group from Ohio University published a study in 1985
on the psychology of sunk cost.
In one of the experiments in this study,
81 college students from Ohio and Oregon were
presented with a scenario in which they owned
a printing business.
Their competitor had just gone broke and offered
to sell them
their super-fast printing press for super
cheap.
But in the scenario,
participants had just bought a new, slower,
more expensive press.
People who said no to the cheap, fast new
press gave reasons like
“I already have a good, new press for a
lot of money,”
which suggested they didn’t want to look
like they’d wasted resources.
Other studies have postulated that the sunk
cost effect can be explained by loss aversion.
That’s the idea that losses are much more
psychologically
impactful than gains of the same size.
For example, you’d probably prefer the idea
of not losing $100 to winning $100.
So people would rather allocate more time
and money to
a sunk cost because they just may turn the
situation around,
rather than stop trying because they know
that the loss is inevitable.
Plenty of other theories have been put forth
over the years.
For example, one 2007 study suggested that
people pursue
sunk costs because they don’t want to regret
giving up.
And some researchers have argued that no one
theory fits everything.
One study published in 1992 found plenty of support for
the self-justification idea, but also suggested
that other theories
might better explain sunk-cost behavior in
specific cases.
Furthermore, a number of factors can potentially
influence whether you still go in on a sunk cost.
They could include how personally responsible
you feel for your original decision
to invest, whether your sunk-cost behavior
is being observed
by an audience, and even whether you’re
making a decision
as an individual or a group.
One study published in Psychological Science in 2018
has even suggested that you don’t have to
incur
the sunk cost yourself to feel the pressure.
In one experiment, participants were more likely to say
that a fictional character named Agatha should
keep playing
the cello if her husband had paid a lot for
her initial lessons,
rather than if he had paid little.
No matter what the explanation, though, sunk
costs
are still sunk costs.
So how do we avoid them?
One researcher, a clinical professor of psychology
at Weill-Cornell Medical School, has suggested
that you should take a step back, let go of any
judgments,
and think about your situation.
For example, are you missing out on other
opportunities because
you’re committed to this one thing?
If you saw someone else
doing the same thing, what would you tell them to do?
The thing is, even if you’ve put so much
time and effort in,
it just may be worth it to let it go in the end.
After all, that’s another way of finishing it.
Thanks for watching this episode of SciShow Psych,
and thanks to our awesome patrons for supporting us.
If you want to help us do what we do here,
check out patreon.com/scishow.
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