What is the sunk coast fallacy costing you? The sunk cost fallacy is essentially the tendency to continue doing something because you have invested money, time, or effort even though it is no longer beneficial (Putten, Zeelenberg, & Dijk, 2010). Here is a really great video to help explain the nitty gritty of the sunk cost fallacy.
A prime example of the sunk cost fallacy in action is my father and his truck. My dad has kept a broken truck sitting our driveway for the past 18 years, and even though the truck hasn't moved in the last 18 years he can't bring himself to get rid of it because the monetary and emotional investment he has made to this truck.
Putten et al (2010) have done some research in determining who is more susceptible to the sunk cost fallacy. Their research shows that a certain type of person is more prone to falling into decisions guided by the sunk cost fallacy. According to their research action-orientated people are less likely to find themselves in these positions because they get over negative events quickly, however state orientated people have trouble getting over negative events so they tend to be susceptible to the sunk cost fallacy. Another article by David Henderson (2014) depicts two types of people, the “Humans” and the “Econs”. Humans tend to use rules of thumb to make their decisions for a variety of reasons, but especially because it allows for fast and easy decision making while Econs tend to debate and think out all the little details. When applying this break down of poeple to the sunk cost fallacy, I would argue that Humans are more susceptible to the sunk cost fallacy then Econs would be becasue they are more similar to state orientated people. Humans, like state orientated people, use their past and present circumstances to determine much of choices, and this kind of decision making can lead to situations that are prone to the sunk cost fallacy.
When relating this back to my father and his truck, it seems like he falls right in place with the state-oriented people and the Humans. He very much relies on his past to help determine his decisions, and has trouble letting go of negative experiences. How can you tell is you are in the middle of a sunk cost fallacy? Take a look at your situation and decide if it benefits you. If you are gaining anything from the situation, then feel free to continue, however if you realize your truck hasn’t moved in the last 18 years then you might want to consider reevaluating your current decision-making process.
Henderson, D. R. (2014). Libertarian paternalism: Leviathan in sheep’s clothing? Sociology, 51, 268-273.
van Putten, M., Zeelenberg, M., & van Dijk, E. (2010). Who throws good money after bad? Action vs state orientation moderates the sunk cost fallacy. Judgment and Decision Making, 5(1), 33–36. Retrieved from http://search.ebscohost.com.proxy.elmhurst.edu/login.aspx?direct=true&db=psyh&AN=2010-04180-004&site=ehost-live&scope=site
MindfulThinks. (2017, July 13). Sunk Cost Fallacy And Why You Should Quit. Retrieved from https://www.youtube.com/watch?v=xXpzfy5oKWg