The Mercury News
WWR Article Summary (tl;dr) New research explores our tendency to stay all in on a botched plan even when it flies in the face of rational decision making.
The Mercury News
Have you ever felt stuck in a relationship that went sour or trapped in a job that no longer rewards you but you just can’t seem to quit?
Meet the sunk cost effect. This is the same reason we have trouble getting rid of clothes we no longer wear or moving out of places we used to love that now drive us crazy (looking at you, Bay Area).
A new paper published in the journal Psychological Science explores our tendency to stay all in on a botched plan even when it flies in the face of rational decision making.
Why do we insist on throwing good money (or time) after bad?
“The sunk cost effect is the general tendency for people to continue an endeavor, or continue consuming or pursuing an option, if they’ve invested time or money or some resource in it,” Christopher Olivola, an assistant professor of marketing at Carnegie Mellon’s Tepper School of Business says. “That effect becomes a fallacy if it’s pushing you to do things that are making you unhappy or worse off.”
One of the reasons we get snared in this psychological trap may be because we hate experiencing regret and admitting that we messed up, experts suggest.
Sticking with the plan, even when it no longer works, is a way to avoid cognitive dissonance: the mental disconnect between paying for something and not getting the expected return on investment, says Olivola.
“After we commit, we humans tend to shackle ourselves to our own decisions,” as Smithsonian Magazine puts it.
The sunk cost fallacy might also be a self-defense mechanism, a way to reinforce our confidence in the effort we’ve already put in, basically, a way to save face with ourselves, as University of Minnesota neuroscientist Brian Sweis told Smithsonian.