Throwing good money after bad
You've already watched 90 minutes of a terrible movie. Do you leave, or suffer through the remaining 30 minutes "so it wasn't a waste"?
In 1985, Arkes & Blumer proved we're systematically irrational: people who paid $15 for theater tickets attended more shows than those who paid $8—even when both had equal access to the same plays!
Sunk costs are gone. They're not coming back. Yet we let them hijack our future decisions.
Arkes & Blumer presented this classic dilemma to test sunk cost reasoning.
You are the CEO of an aerospace company. You have invested $9 million developing a radar-blank (stealth) airplane. The project is 90% complete.
Now you learn that a competitor has just released a plane that is faster and cheaper than yours will be. Your market research confirms that almost no one will buy your plane when it's finished.
In Arkes & Blumer's study: 85% chose to continue when told about prior investment.
Only 10% continued when the prior investment wasn't mentioned!
Three groups bought season tickets at different prices. Same plays. Same access.
Who attended more?
Full-price buyers attended 25% more shows—not because they enjoyed them more, but because they'd "sunk" more money into the tickets.
Click each step to reveal the rational alternative you're ignoring.
The supersonic passenger jet became the poster child for sunk cost reasoning.
By the mid-1970s, it was clear the British-French Concorde project would be a financial disaster. Costs were astronomical. Revenue projections were grim. But billions had already been spent.
Rather than "waste" past investment, they poured in more money. The project eventually cost 4x the original estimate. Concorde never made a profit.
Richard Dawkins coined "Concorde fallacy" in 1976 to describe this behavior in animals and humans alike.
"We've watched 90 minutes—might as well finish it." But those 90 minutes are GONE. The only question: would you rather spend the next 30 minutes suffering or doing something enjoyable?
"But we've been together 7 years!" Those years are sunk. The only question: will the NEXT 7 years be good? Past investment doesn't make a bad future worthwhile.
You force yourself to go because "I'm paying $50/month!" But if going makes you miserable, you're now losing money AND happiness. The money is gone either way.
"I spent 4 years on this degree!" Yes, and those years are gone. Would you rather spend 40 more years in a career you hate, or cut losses now?
As casualties mounted, so did pressure to continue—"to honor those who died." But each new death was a NEW tragedy, not a recovery of past losses.
"I paid for this buffet—I'm getting my money's worth!" But the price is sunk. Eating until you're sick doesn't recover it; it just adds suffering.
The seminal paper "The Psychology of Sunk Cost" demonstrated through multiple experiments that people systematically allow past investments to influence current decisions—even when those past investments are irrelevant to future outcomes.
"The sunk cost effect is a maladaptive economic behavior that is manifested in a greater tendency to continue an endeavor once an investment in money, effort, or time has been made." — Arkes & Blumer (1985), Organizational Behavior and Human Decision Processes
Economists call this the "marginal analysis" approach: only consider the costs and benefits FROM THIS POINT FORWARD. The past is irrelevant to the future.
Ask yourself: "If I hadn't already invested anything, would I choose this option today?" If no, the sunk costs are hijacking your judgment.
Studies on birds and other animals show they abandon nests when the expected payoff no longer justifies the effort—regardless of how much they've already invested. Humans are uniquely susceptible to sunk cost reasoning.