The Sunk Cost Fallacy: Why We Stay With Bad Decisions—and How to Walk Away

You paid for the ticket.

Halfway through the movie, you realize that you are not enjoying it.

You could leave and use the remaining hour for something better. But a thought appears:

“I paid for this. I should finish it.”

So you stay.

The money will not return whether you watch the ending or walk out. Staying does not recover the ticket price. It only determines how you spend the next hour.

That is the basic logic of the sunk cost fallacy: allowing money, time, or effort that cannot be recovered to influence what you choose next.

It can happen with a movie.

It can also happen with a failing business project, an expensive purchase, a course you no longer need, a career that is taking you nowhere, or an item that keeps demanding increasingly costly repairs.

The larger the investment becomes, the harder walking away may feel.

But the most important question is not:

“How much have I already invested?”

It is:

“From this moment forward, is continuing still the best use of what I have left?”

What is a sunk cost?

A sunk cost is something you have already spent and cannot recover.

It might be:

• money,
• time,
• effort,
• emotional energy,
• missed opportunities,
• reputation attached to a previous decision.

Suppose you have already spent $2,000 repairing something that still does not work properly.

That $2,000 matters to your life and your finances. You should learn from it.

But when deciding whether to spend another $1,000, the previous amount cannot be recovered by continuing.

The new decision should compare:

• the additional cost from today onward,
• the expected future benefit,
• the available alternatives,
• the risk that the problem will continue.

In their classic 1985 paper, psychologists Hal Arkes and Catherine Blumer defined the sunk-cost effect as a greater tendency to continue an endeavor after investing money, effort, or time.

In one field study, people who had paid more for theater season tickets attended more performances during the first six months than people who had paid less. The larger past payment appeared to create greater pressure to use the purchase.

The money was already gone.

But it continued influencing behavior.

A personal observation from sales

I spent many years working in sales in an industry involving one of the largest purchases people commonly make after buying a home.

I saw sunk costs affect decisions before I knew the scientific name for them.

A person might invest hours into a conversation.

They might compare several options, complete paperwork, discuss financing, imagine the purchase in their daily life, and begin feeling that the process was nearly finished.

At that point, walking away no longer felt like simply declining an offer.

It felt like wasting the entire afternoon.

Sometimes people would discover information that should reasonably have made them pause. But instead of evaluating the decision again from the beginning, they would say something like:

“We have already come this far.”

That sentence is a warning sign.

The time already spent does not make the offer better.

The completed paperwork does not lower the future cost.

The emotional effort does not improve the product.

This does not mean the professional involved is dishonest. A legitimate seller can genuinely believe the purchase is suitable.

But every completed step can create psychological momentum.

And once momentum develops, people may continue partly because stopping would force them to accept that the previous effort produced no final purchase.

The distance you have already traveled does not prove that the road ahead leads somewhere worth going.

Why walking away feels like wasting what we invested

From a purely forward-looking perspective, an unrecoverable cost should not determine the next decision.

Emotionally, however, ignoring it can feel deeply wrong.

Arkes and Blumer proposed that one important motivation behind the sunk-cost effect is the desire not to appear wasteful.

Their experiments also found that people who had already invested in a project sometimes estimated its chances of success more optimistically than people judging the same project without that prior investment.

That creates a convenient story:

“I am not continuing because I cannot admit I was wrong. I am continuing because success is probably close.”

Past investment may therefore influence not only what we choose, but how we interpret the project’s future.

We begin searching for reasons the next payment, next month, or next attempt will finally make everything worthwhile.

We want the earlier decision to become correct

Walking away can feel like admitting that the original decision was a mistake.

That feeling becomes especially powerful when the original decision was personally ours.

In a foundational experiment, organizational psychologist Barry Staw placed participants in a simulated business-investment situation.

Participants invested the most additional resources in a failing course of action when they had been personally responsible for the original decision and then received negative feedback about its outcome.

This is often called escalation of commitment.

We do not merely defend the project.

We defend the person who selected it—ourselves.

Continuing creates the possibility that the original decision will eventually be vindicated.

Stopping makes the loss feel final.

That is why saying:

“I was wrong, so I must continue until I become right”

can feel more comfortable than saying:

“I made the best decision I could then, but the evidence is different now.”

The second statement may be more rational, but it requires more humility.

The closer we are to finishing, the harder it becomes to stop

Imagine a project that is 90 percent complete.

Surely stopping now would be ridiculous.

But “90 percent complete” tells you how far you have come. It does not automatically tell you:

• how expensive the remaining 10 percent will be,
• whether the finished project will work,
• whether anyone still needs it,
• whether a better alternative now exists.

Research on escalation of commitment has found that sunk costs and the desire to complete a nearly finished project can exert separate and interacting pressures on decisions.

People may continue because they have already invested heavily, because the finish line appears close, or because both are true simultaneously.

This matters because the final part of a project is not always the easiest or cheapest.

The last repair can uncover another problem.

The final development stage can require a redesign.

The last semester of a program can still be the wrong investment if the qualification no longer serves your goals.

Completion has value—but only when the completed result has value.

“Almost finished” is not the same as “still worth finishing.”

The brain does not simply erase the past

Neuroscience does not suggest that the brain contains one tiny “sunk cost center.”

The process appears to involve interactions between systems concerned with value, rules, conflict, and previous investment.

In a 2014 human neuroimaging study, Ariane Haller and Lars Schwabe found that previous investments altered activity and interactions involving prefrontal regions during new financial decisions.

The results suggested that a social or internal rule against wasting resources could interfere with the current evaluation of an option’s future value.

A later study found behavioral and neural evidence that prior costs and gains can recalibrate the reference point against which a new choice is evaluated.

In other words, the brain may not treat the next decision as a clean, isolated event. The history of the investment can change what continuing or stopping feels like now.

This does not mean the brain forces us to continue.

It means the past can become part of the present value calculation—even when it should no longer determine the best future action.

Not every act of persistence is a fallacy

This distinction is essential.

Continuing something after a large investment is not automatically irrational.

Suppose you have nearly completed a professional qualification. Finishing requires one more month, costs very little, and will provide an important credential.

The time already spent is technically sunk.

But the future benefits may still justify continuing.

Or suppose a repair will cost another $200 and reliable evidence shows that it will restore the item for several years.

Again, continuation may be sensible.

The fallacy occurs when past investment becomes the reason for continuing, even though the expected future costs now outweigh the expected future benefits.

Ask:

“Am I continuing because the future still looks worthwhile—or because I cannot tolerate what stopping would say about the past?”

Those are very different reasons.

Research also shows that sunk-cost findings depend on the task and context.

A 2022 incentivized investment study even found a reverse pattern: larger initial investments sometimes made participants less willing to invest again.

That is a useful scientific warning against treating the bias as universal or assuming that everyone always responds identically.

A cognitive bias is a tendency, not a law controlling every person in every situation.

Money is not the only thing we sink

The easiest examples involve money, but time and effort can be even harder to release.

“I have already spent three years on this.”

That statement explains the past.

It does not tell you whether spending a fourth year is sensible.

“I have worked too hard to stop now.”

The effort deserves respect.

But respecting previous effort does not always mean adding more.

Sometimes the best way to honor what you invested is to use what you learned somewhere else.

“I cannot start again.”

You would not actually be starting from zero.

You would be starting with experience, skills, information, and a clearer understanding of what does not work.

Leaving a path does not erase everything you learned while walking it.

Relationships require more care than a spreadsheet

People sometimes use the term “sunk cost fallacy” when discussing relationships:

“I have already given this relationship ten years.”

Past time alone does not prove that staying is right.

But human relationships are more complex than theater tickets or financial investments.

They involve commitments, responsibilities, shared lives, safety, children, trust, and the possibility of repair.

The sunk-cost concept can still provide one useful question:

“Am I staying because the relationship has a worthwhile future—or only because leaving would make the past feel wasted?”

It cannot answer the entire question for you.

For serious personal situations, especially those involving safety, abuse, financial dependence, or children, a simple decision-science framework is not a substitute for qualified and independent support.

The principle is not “always quit.”

The principle is “evaluate the future honestly.”

A practical method for escaping the sunk-cost trap

1. Temporarily erase the past

Ask:

“If I had invested nothing so far and faced this opportunity for the first time today, would I choose it?”

Suppose you did not already own the item.

Would you buy it today at the cost of the next repair?

Suppose you had not already spent six months on the project.

Would you begin it today, knowing what you now know?

This question does not make the past meaningless.

It prevents the past from automatically controlling the next step.

2. Create a future-only balance sheet

Draw a line across the page.

Everything above the line has already happened.

Everything below the line can still be changed.

Above the line, write:

• money already spent,
• time already spent,
• effort already spent.

Acknowledge it.

Then stop including it in the comparison.

Below the line, write:

• additional resources required,
• probability of success,
• expected future benefit,
• available alternatives,
• risks created by continuing,
• risks created by stopping.

The new decision lives below the line.

Research by Tan and Yates found that sunk-cost effects could be reduced under some conditions by teaching the relevant economic principle and by asking people to make explicit estimates of future returns.

That supports a highly practical rule:

Do not ask whether you have spent too much to stop. Ask what you are likely to receive for the next unit of time, money, or effort.

3. Calculate the opportunity cost

Continuing does not only consume the next dollar.

It also prevents you from using that dollar somewhere else.

The next six months devoted to a failing project cannot simultaneously be spent building a better one.

The next repair bill cannot be used toward a replacement.

The next evening spent completing a course you no longer value cannot be used learning something more relevant.

Ask:

“What am I unable to do because I am continuing this?”

The alternative is part of the cost, even when no invoice arrives for it.

4. Look for new evidence—not new justification

Write down what would need to be true for continuing to make sense.

For example:

• the repair must reasonably provide at least two more years of use,
• the project must reach a measurable milestone by a particular date,
• the course must still be required for the career I want,
• the business must produce evidence of real demand before receiving more money.

Then ask whether you have evidence for those conditions.

Do not count optimism as evidence merely because stopping feels painful.

Do not let:

“Maybe this time will be different”

replace an actual reason it should be different.

5. Let someone without ownership review the decision

The person who made the original choice may feel pressure to defend it.

An outside reviewer does not carry the same emotional burden.

Ask someone who:

• receives no commission,
• did not make the original decision,
• does not need to protect the project,
• is willing to disagree with you.

Do not ask only:

“Do you think I should stop?”

Give them the future-only information and ask:

“Would you choose to invest from this point forward?”

Staw’s research on personal responsibility helps explain why separating the original decision-maker from the reassessment can be useful: ownership of the earlier decision can increase commitment after negative feedback.

6. Define exit conditions before beginning

It is easier to create a stopping rule before you become emotionally invested.

Before starting a project, decide:

• the maximum budget,
• the maximum time,
• the minimum acceptable result,
• the evidence that would justify continuing,
• the conditions that would trigger reassessment or withdrawal.

For example:

“I will test this project for three months. If it does not achieve X by that date, I will stop or redesign it.”

An exit rule does not require you to abandon the project automatically.

It forces a fresh evaluation at the moment you originally believed evaluation would be necessary.

Without that rule, every setback can produce the same promise:

“Just a little more.”

7. Turn stopping into an action

Stopping is often framed as doing nothing:

• giving up,
• abandoning,
• walking away,
• failing to finish.

Continuing feels active.

But stopping can also be an action:

• redirecting the budget,
• selling the asset,
• canceling the contract,
• transferring the skills,
• closing the project deliberately,
• creating a replacement plan.

Experiments by Gilad Feldman and Kin Fai Ellick Wong found that escalation was stronger when continuing was framed as action and stopping as inaction.

Reversing that frame—making de-escalation the active choice—reduced some of the pressure to continue.

So do not merely say:

“I will stop.”

Say:

“On Monday, I will cancel the subscription and move the budget to savings.”

Or:

“I will close this project, document what we learned, and redirect the team to the alternative.”

Walking away becomes easier when it leads somewhere.

8. Pause before defending the past

One study involving four experiments found that mindfulness was associated with greater resistance to sunk-cost bias.

Brief mindfulness exercises appeared to reduce the influence of past- and future-focused negative emotion on the current choice.

A later study found a more qualified pattern: mindfulness was more consistently associated with reduced escalation of commitment than with resistance to sunk costs specifically.

The evidence is therefore promising, but not a guarantee that a short meditation eliminates the bias.

The practical lesson does not require becoming a meditation expert.

Before recommitting, pause.

Notice the emotion without immediately converting it into another investment.

You may be feeling:

• shame,
• frustration,
• fear of waste,
• embarrassment,
• hope of proving yourself right.

Those emotions are real information about your experience.

They are not necessarily evidence that continuing will produce a better outcome.

The five-question sunk-cost reset

When you are unsure whether to continue, answer these questions:

1. What has already been lost and cannot be recovered?

State it honestly.

Do not pretend it was free.

2. What additional investment is required from today forward?

Include money, time, effort, risk, and missed alternatives.

3. What future benefit can I reasonably expect?

Use current evidence, not the expectations you had when you began.

4. Would I start this today under the current conditions?

Imagine that the previous investment belonged to someone else.

5. What will I do with the resources if I stop?

Give the released money, time, or effort a new destination.

If continuing still wins after those questions, continue deliberately.

If it does not, stop deliberately.

Either decision can be responsible.

Do not turn the sunk-cost fallacy into a quitting machine

Learning about the bias can create the opposite mistake.

You may begin labeling every difficult period as a sunk cost.

A business can struggle temporarily and later succeed.

A skill can require uncomfortable practice before improvement becomes visible.

A relationship can pass through a difficult period and still have a valuable future.

Persistence is not foolish merely because it is painful.

The correct comparison is always forward-looking:

Expected future benefit versus expected future cost.

Not:

Comfortable versus uncomfortable.

Not:

Easy versus difficult.

Not:

Continue versus admit defeat.

Sometimes continuing is the brave decision.

Sometimes stopping is.

The sunk-cost principle does not tell you which one to choose.

It removes one bad reason from the calculation:

“I must continue because I have already invested too much.”

Final thought

People often say:

“I cannot let everything I invested go to waste.”

But continuing does not automatically rescue the investment.

Sometimes it only adds another layer to the loss.

The money you spent may be gone.

The time may be gone.

The original opportunity may be gone.

That can be painful to accept.

But the next dollar is not gone yet.

The next month is not gone yet.

The next decision is still yours.

Years in sales taught me that people often focus so heavily on completing a purchase that they stop evaluating whether completing it remains right for them.

The same thing happens far beyond sales.

We become loyal to the road because we paid to enter it.

Decision science gives us permission to stop and look forward.

Not because the past does not matter.

Because the past has already happened—and the future has not.

When you feel yourself saying:

“I have already invested too much to stop”

replace it with:

“Knowing what I know now, what is the best decision I can make with what remains?”

That is not wasting the past.

That is learning from it.