Sunk-Cost Effect

Explanations > Theories > Sunk-Cost Effect

Description | Example | So What? | See also | References 

Description

When we have put effort into something, we are often reluctant to pull out because of the loss that we will make, even if continued refusal to jump ship will lead to even more loss. The potential dissonance of accepting that we made a mistake acts to keep us in blind hope.

Example

It is common for people who have invested in company shares to hold on tight to them as the market slumps, in the desperate hope that the shares will rise in price again.

So what?

Using it

Get people to make a number of small and easy commitments. When they try to pull out, remind them of the total commitment they have already made.

Defending

When thinking of pulling out of something, focus on future costs and benefits rather than past investment.

See also

Commitment, Cognitive Dissonance, Investment Model

References

Arkes and Blumer (1985)