People make many decisions every single day so one would think we would be pros in the field, however; it is not uncommon to regret a decision or wonder why we stuck with a decision that we did not end up liking. Dr. Sweis and colleagues explored this phenomenon and showed that humans are not the only ones who stick to decisions when they should really just give them up. Dr. Sweis designed a study surrounding a task that measured susceptibility to sunk costs. A sunk cost is an economic term describing past investments which are not recoverable and yet often influence how decisions are made. This phenomenon has most likely been experienced by everyone at some point, whether it was displayed through watching an entire movie even though it was boring, eating a bad meal because it was expensive, or staying in a relationship even though it is not satisfying. All of these examples display sunk costs’ influence on decision making because the choices were made based on the past investments: choosing a movie and devoting a certain amount of time to watch it, paying money for food, giving time and emotional vulnerability to the relationship. Each of these things already happened, so they should not affect the decision to continue with them and yet they do.
The work of Dr. Sweis et al. displayed susceptibility to sunk costs can be found in multiple species including rats, mice, and humans. The psychological explanation for this susceptibility given by Dr. Sweis is that it may be more advantageous to calculate effort already expended than to calculate potential future effort and time. One already knows how much effort, time, and potential other opportunity costs they have put into a decision but they do not know how much they will have to give in the future which often makes them stick to their original decision. For example, if someone were to watch a boring movie, they might have spent some time searching for a movie to watch and then watched a certain amount of the movie to see if it would pick up. They already invested their time so should they stop the movie, or do they finish the movie? Dr. Sweis’s research might suggest they would be susceptible to sunk costs and finish the movie because they already invested in it so they would want to see their investment through. This decision leaves out the fact that they would have to invest even more time in the movie that they were not interested in.
Economist Megan McArdle invested three years in a relationship she was not sure about only for it to end. Despite picking up on red flags throughout the beginning of the relationship, McArdle stayed in the relationship, hoping for a marriage, when she should have jumped ship. She explains in her interview on NPR with Jacob Goldstein that it took her until after the relationship was over to realize why she had stayed for so long when it was not going in the direction she wanted. She realized that she had been susceptible to sunk costs, something she constantly wrote about in reference to the economy. McArdle had invested her time and care into the relationship and describes not wanting to let go of that investment. Ultimately the relationship ended due to her partner breaking it off which meant that in the end the investment did not have the return she had hoped for. This occurrence is not uncommon and is just one example of someone going down with their sinking ship, unwilling to jump because in the past, they put something into that ship that they cannot get back. It would be better overall for us to leave past investments in the past and focus our decisions on future outcomes.
Citations:
Goldstein, Jacob. “How Sunk Cost Fallacy Applies To Love.” NPR, NPR, 13 Feb. 2015, www.npr.org/2015/02/13/385948508/how-sunk-cost-fallacy-applies-to-love.
Sweis, Brian, et al. “Sensitivity to ‘Sunk Costs’ in Mice, Rats and Humans.” Science, vol. 361, no. 6398, 2018, pp. 178-181., doi: 10.1126/science.aar8644
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