Sunk Cost Fallacy | All you need to know

Sunk cost fallacy is a cognitive bias that dictates our decision-making. It tells us that we are more likely to continue investing in something as long as we have invested so much in the past, regardless of whether or not it is rational to do so. The sunk cost fallacy can lead us to make bad decisions because we are unwilling to cut our losses.

The sunk cost fallacy is a cognitive bias that leads us to believe that we have already invested too much in something to give it up now. This can lead us to make irrational decisions, such as continuing to invest time or money in a failing project, because we feel like we can’t afford to waste what we’ve already put in. This bias is especially dangerous when it comes to our personal relationships.

We may stay in a job or relationship longer than we should because we feel like we’ve invested so much already and can’t afford to start over. But the truth is, if something isn’t working out, it’s better to cut your losses and move on. If you find yourself falling into the sunk cost fallacy, try to reframe your thinking.

Remind yourself that the past is gone and you can’t get it back. Focus on what you stand to gain by making a different decision, rather than what you might lose. And most importantly, don’t be afraid to start over.

Sunk Cost Fallacy Relationships

When it comes to sunk cost fallacy in relationships, this occurs when someone continues to invest time and resources into a relationship even though it’s not working out. This can be because they feel like they’ve already put so much into the relationship and don’t want to give up, or because they think things will eventually get better. However, continuing to invest in a failing relationship is usually not productive and can actually make things worse.

It’s important to be able to recognise when a relationship is no longer working and take steps to end it instead of continuing to try and make things work. If you find yourself in a situation where you’re continually putting more into a relationship than you’re getting back, it may be time to let go.

Sunk Cost Fallacy


What is an Example of Sunk Cost Fallacy?

The sunk cost fallacy is the tendency to continue investing in something as long as you have invested so much in the past, even if it is no longer rational to do so. For example, someone might stay in a bad relationship because they have invested so much time and energy into it, even though it is clear that it is not working out. Or, someone might keep going to a job they hate because they have already put so many years into it.

The sunk cost fallacy can lead us to make irrational decisions that we would not make if we were thinking about the situation more objectively.

What is Sunk Cost Fallacy in Relationships?

Sunk cost fallacy is the belief that we have already invested so much in a relationship, whether it be time, energy, or emotion, that it would be foolish to walk away from it. This can often lead us to stay in unhealthy or unhappy relationships far longer than we should. The sunk cost fallacy can also prevent us from taking risks or trying new things in our relationships.

After all, if we’ve already invested so much in this one relationship, why take a chance on starting something new? The sunk cost fallacy is rooted in fear and insecurity. We worry that if we walk away from what we have now, we’ll never find anything better.

Or worse, we might end up alone. But the truth is, no matter how long we’ve been in a relationship, it’s never too late to start over again. If you’re not happy with where your relationship is at right now, don’t be afraid to make a change.

Life is too short to stay stuck in a rut out of fear of the unknown.

What is Sunk Cost in Simple Words?

Sunk cost is a term used in economics to describe a cost that has already been incurred and cannot be recovered. In other words, it is a sunk expense. This concept is important because it can influence decision-making.

For example, imagine you are considering whether or not to attend a concert. You have already bought the ticket, so the cost of attending the concert is fixed (or sunk). Whether or not you go to the concert now depends on how much you value the experience.

If the opportunity cost of going to the concert (the value of your time) exceeds the price of the ticket, then you might choose not to go. However, if attending the concert would be more enjoyable than any alternative use of your time, then you would probably choose to go. In business, sunk costs can be significant and can impact important decisions such as whether or not to continue with a project.

For example, imagine a company has invested $1 million in developing a new product. The company has spent this money and cannot get it back regardless of what happens next. The decision about whether or not to continue with the project now depends on future costs and revenues associated with commercializing the product.

If these future cash flows are expected to exceed $1 million, then it makes sense for the company to continue with the project (assuming all else is equal). However, if they are expecting future cash flows to fall short of $1 million, then discontinuing the project may be preferable since it will minimize losses. In summary, sunk costs are expenses that have already been incurred and cannot be recovered regardless of what happens next.

What is the Sunk Cost Dilemma?

The sunk cost dilemma is a decision-making problem in which an individual or organization continues to invest resources (time, money, etc.) into something because they have already invested so much, even though it may not be the best decision to do so. The sunk cost fallacy is when people make decisions based on these sunk costs instead of on what would actually be the best thing to do. This can lead to sub-optimal decision-making and can cause individuals or organizations to waste resources that could be better used elsewhere.

It’s important to be aware of the sunk cost dilemma and avoid falling into the trap of making sub-optimal decisions because of it.


The sunk cost fallacy is a cognitive bias that leads us to believe that we have invested so much in something that we must see it through to the end, regardless of whether or not it is actually in our best interest. This can lead to suboptimal decision-making and even losses, as we continue to invest time, energy, and resources into something that may no longer be worth pursuing. The sunk cost fallacy stems from our aversion to loss, which causes us to value what we have already invested in more highly than what we would gain by walking away.

While it may be difficult to let go of something that we have put so much into, it is important to remember that the past cannot be changed and only the future matters when making decisions.

Leave a comment

Your email address will not be published. Required fields are marked *