Category: Cognitive Biases

The Sunk Cost Fallacy: Persisting on the past

The Sunk Cost Fallacy refers to the situation where past investments prohibit us from pulling out of something that we have put effort into. According to Arkes and Blumer, “the Sunk Cost Effect is manifested in a greater tendency to continue an endeavor once an investment in money, effort, or time has been made.”

Illusion of truth effect: You repeat, I believe

If statements are made again and again in a confident manner, without argument or proof, then their hearers will tend to believe them quite independently of their soundness and of the presence  or absence of evidence for their truth. This phenomenon is known as The illusion of Truth.

The Lipstick Effect

The Lipstick Effect: what is it all about?

  First brought into spotlight by Leonard Lauder, the chairman emeritus of The Estée Lauder Companies Inc., the Lipstick Effect states that during economic hardships and crises, consumers tend to buy more lipstick instead of expensive items such as jewelries, apparel or the like. Proponents of this theory refer to the fact that after the 9/11, statistics showed an 11% rise in demand for lipsticks. Later, in 2008, Lauder said that he had noted a rise in his company’s sales of lipstick. Similarly, during the Great Depression, cosmetic sales rose while the economy was experiencing some of its darkest days....