Sunk cost effect
We stick with something because we have already invested money, time or effort in it, even when continuing doesn’t serve us.
What problem it addresses
It explains why we finish a movie we don’t like, keep projects that don’t work or use what we paid for even when we no longer feel like it.
An example
You have paid for two trips on the same weekend: one for $100 and another for $50 that you prefer. You can’t get a refund for either.
Neither choice got the money back, but the more expensive trip weighed more than enjoyment.
Why it happens
Seeing what we invested go to waste hurts, and we want to avoid it.
Carrying on feels like not wasting, even though what was spent won’t come back.
Quitting would seem to admit that we were wrong.
Applications in design
Use it like this
Help people decide by looking ahead: what the person gains from now on.
Avoid
Reminding people what they have already paid so they won’t cancel something that doesn’t serve them.
Don’t fall for it
Ask yourself: if I hadn’t paid anything, would I keep going with this?
4.11 vs 3.3
What the research says
Plays seen on average in the first half of the season: those who paid full price for the season ticket versus those who got it at a discount (Arkes and Blumer, 1985).
Solid evidence. In the second half of the season the difference disappeared: the weight of past spending fades over time.
Connections
Used in
Authors and works
- 1980
Richard Thaler
Described it as one of the consumer behaviors that classical economics doesn’t explain.
- 1985
Hal Arkes and Catherine Blumer
Demonstrated it with dilemmas and with a real experiment on theater season tickets.
Sources
Original sources
- Arkes, H. R., & Blumer, C. (1985). The psychology of sunk cost. Organizational Behavior and Human Decision Processes, 35(1), 124–140. View source: Arkes, H. R., & Blumer, C. (1985)
- Thaler, R. (1980). Toward a positive theory of consumer choice. Journal of Economic Behavior & Organization, 1(1), 39–60. View source: Thaler, R. (1980)
Last reviewed: