BRIAN & RUTH Bias #3 · Sunk cost fallacy

Why can't we quit a bad deal?

We keep paying for something because of what we already spent.

What happened to Brian

His old car has eaten three thousand euros in repairs. Brian can't sell it now, he says, because he has invested too much. But those three thousand euros are gone whether he keeps the car or not.

The study

In 1985, Hal Arkes and Catherine Blumer had a university theater sell season tickets at three prices: full price, a $2 discount or a $7 discount, handed out at random. In the first half of the season, the people who paid full price went to more plays (4.11 on average) than the people who got a discount (3.32 and 3.29). Same plays, same seats.

The money is gone either way. Ask whether you would start this today, knowing what you know now. If not, stop.

And with AI?

Soon AI subscriptions will renew for us every month. How many will we keep, just because we already paid? Are we prepared for a full AI life? Tell us in the comments on YouTube, Instagram or TikTok.

Source: Arkes, H. R., & Blumer, C. (1985). The psychology of sunk cost. Organizational Behavior and Human Decision Processes, 35(1), 124-140. Read the study (Elsevier) · Full text (PDF)