In the field of economics, the sunk cost fallacy — also called the sunk cost effect — is notorious. It occurs whenever we double down on poor financial decisions based on past investments that can't be recouped.
But the phenomenon isn’t relegated only to the realm of business. You may be surprised to learn that it often rears its ugly head in our relationships as well.
Sunk Cost Fallacy Examples
Christopher Olivola, an associate professor of marketing at Carnegie Mellon University, offers up a few examples of sunk cost fallacy pertaining specifically to finances.
You might sit through the entirety of a movie that you hated from the beginning, for instance, if only to justify the cost of the ticket. Likewise, you might continue hitting the gym, even after sustaining a painful injury, if your expensive membership is nonrefundable.
“But what’s happening in all these situations is you’re not really getting that money, or that time, or that effort — or whatever it is you invested — back,” says Olivola. “That’s part of why it’s irrational.”
As a more worldly example, he points to the sunk cost fallacy as contributing to the length of the U.S. involvement in the Vietnam War. As fatalities mounted, he says, so too did the fear of devaluing those lost lives by pulling out of the war without a victory.
The same faulty reasoning has also been tied to ongoing investments in fossil fuels, despite bleak climate projections and increasingly available energy alternatives.
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Sunk Cost Fallacy in Relationships
When it comes to romantic relationships, the associated stakes aren’t quite as high as some of the above examples. More often than not, lives are not on the line, after all. But the sunk costs in question — money, time and emotional effort — still ring true.
In a 2018 study published in Current Psychology, researchers from the University of Minho in Portugal offered up a reason why we stay in unhappy relationships. Spoiler alert: The sunk cost effect is to blame.
In one experiment, the research team presented more than 900 participants with a far-from-perfect relationship scenario. When the participants were given a chance to leave this hypothetical relationship, their responses showed that we’re more likely to stay in such situations when we’ve previously invested significant money and effort.
A follow-up experiment, in which a smaller number of participants were asked to choose how much time they would be prepared to invest in a relationship, revealed that we’re also willing to put more time into a relationship if more time has already been invested. Participants were willing to stick with an unfulfilling relationship for nearly 300 days past its expiration date, in fact, so long as that relationship had already lasted for a decade or longer.
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Of course, don’t think you’re in the clear just because you’re single; research has shown that the sunk cost fallacy sinks its claws into our non-romantic relationships, too.
A few years ago, Olivola designed experiments to parse how the sunk cost fallacy applies not only to our own past investments but also to the investments of others. His findings were published in Psychological Science in 2018.
“If my wife spends a lot of money to buy me a sweater and it’s really itchy,” he explains, “I’m more likely to force myself to wear it to kind of justify or honor her investment in the same way that if I myself had spent a lot of money.”
But, surprisingly, he discovered that the same line of thinking is often applied to our friends and colleagues — even strangers.
In one experiment, Olivola asked participants to imagine that they are extremely full when a cake is unveiled at a potluck. Some were told the cake was inexpensive, while others were led to believe it had come from a fancy bakery an hour away. As an added layer, some participants were told that they had purchased the cake themselves; in other scenarios, a friend or stranger had brought it.
For each of these circumstances, ask yourself if you are more or less likely to eat a piece of cake despite your fullness. According to Olivola’s findings, we’re probably chowing down regardless of who purchased the dessert.
Sunk Cost Fallacy Psychology
Another example can be applied to the workplace: Even if you no longer feel your job is serving you, you might be more likely to stick around when you consider how long your boss spent training you — or when you consider the generous raises they handed out.
The psychology of the sunk cost fallacy is a robust phenomenon that’s been studied time and time again. But researchers haven’t quite pinned down the reason humans keep falling for it. “There’s a lot of different mechanisms that could be explaining it,” says Olivola. “And maybe it has multiple mechanisms.”
Based on his own research, he tends to blame our desire to minimize waste. “We don’t like to see ourselves as wasteful and we don’t like to see other people as wasteful,” he says, though he admits that this aversion is largely rooted in Western culture.
Another possible reason? We tend to open up a mental “bank account” whenever we invest money, time or effort into something, he says. Subsequently, the only way we can then “close” this account is by getting our figurative money’s worth.
“Otherwise, it feels like an incomplete transaction and we don’t like that,” Olivola says.
Overcoming Sunk Cost Bias
In certain circumstances, the sunk cost fallacy could actually help you achieve major goals like becoming more fit or finishing a degree. But if you find yourself fixating on past decisions you can’t change at the expense of what you can in the present or future, the sunk cost fallacy is no longer serving you.
How, then, do we overcome sunk cost bias? When it comes to honoring other peoples’ investments, Olivola says it’s important to remember that our friends and family members don’t actually want us to suffer at their expense — even if it’s something as trivial as an itchy sweater.
“I don’t think you can argue that it’s any more rational to honor another person’s sunk costs,” he says. “If you’re suffering, then that’s bad for two people: you and the people who care about you, right?”
But in general, simply taking a breath and focusing on what’s going to make you the happiest moving forward is a great tool.
In a 2013 study published in Psychological Science, researchers found that just 15 minutes of mindful meditation helped 77 percent of participants to give up a sunk cost. This success may have to do with meditation’s ability to improve mood and decrease our focus on the past, the researchers suggest.
Of course, don’t feel too bad if you still find yourself struggling. Even for Olivola, who has spent more than two decades studying these sorts of things, the sunk cost effect is still incredibly irresistible.
“Sometimes I realize I’m doing it, I realize that it’s irrational, that it’s a bad idea — and I still do it,” he says. “So, you know, if you can overcome it, you’re better than me.”
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