Sunk Costs: From the Lab to Wall Street

Sunk Costs: From the Lab to Wall Street

By: Cordelia de la Fuente 

Understanding human behaviour is the essence of cognitive neuroscience. From psychological decision making to neuronal mechanisms, being able to predict and foresee how the brain will react to its given environment is the foundation of this field of study. In the research study “Sensitivity to ‘sunk costs’ in mice, rats and humans,” published by Dr. Brain Sweiss on the concept of ‘sunk costs,’ he and his team analyzed how organisms deal with decisions that cannot be revoked in present time. Sweis was able to break down the idea that organisms have the capacity to envision and construct different futuristic outcomes given the decisions they make in the present moment. 

The main results from this study concluded that the sensitivity that organisms have to temporal sunk costs, lies in a conceptual vulnerability to distinguish between deliberation and differentiation processes. Decision making based on deliberation means that the brain will actively compare and weigh the available options, whereas differentiation implies that the organism uses previous bias to conduct their next decision move, and will justify it afterwards. 

 Sweis' study arrived at the conclusion that rather than making new evaluations at each decision point, organisms will often lean into their prior investments to serve as a bias for their behavior moving forward, even when it is not rational to do so.

Despite the findings and focus point of the research being purely biological,  the science behind sunk costs is at the center of psychological applications of decision making. In another article published in the Wall Street Journal, “The Psychologist that Turned the Investing World on its Head,” featured how the work of Daniel Kahneman, who was awarded the Nobel prize for economics,  linked the neuroscience of decision making into the world of economics through sunk costs. The article goes into depth on how sunk costs in neuroscience is what originally led Kahneman to publish his theories on behavioral economics. This difference in application showcases how the sensitivity that humans have to sunk costs, is present in the way that we work and function in modern society. 

The article explains how Kahneman dedicated his career to the development of behavioral economics, conducting studies that prove how there is a sunk cost misconception that spreads throughout financial markets. Kahneman takes the objective understanding of Swies work and applies it to how investors consistently hold onto declining assets simply because of prior investments. He concludes that the emotional weight of sunk costs often overrides rational decision-making, constantly leading to millions of dollars in losses for finance professionals.

By understanding how brain decision making on the neural level works, scientists can take the biological findings and apply them in fields of human behaviour. In the Wall Street Journal example, there is a clear tie in how sunk costs contribute to the fluctuation of economic markets. Being able to apply and see the broader application of this neuroscience, shows there is a powerful truth that is being underscored: the sensitivity to sunk costs is critical not only for advancing neuroscience but for addressing real-world behaviors. As the scientific community continues to understand the neurological mechanisms that coordinate the way humans think and make decisions, the potential to apply this knowledge in tangible and transformative ways increases across society. 

Work Cited

Zweig, Jason. “The Psychologist Who Turned the Investing World on Its Head.” WSJ, 29 March 2024, https://www.wsj.com/finance/investing/daniel-kahneman-behavioral-economics-270c9797. Accessed 27 April 2025.

Sweis, Brian M., et al. “Sensitivity to ‘Sunk Costs’ in Mice, Rats, and Humans.” Science, vol. 361, no. 6398, 2018, pp. 178–181, https://doi.org/10.1126/science.aar8644.