Tagged: The Sunk Cost Fallacy

Loss Aversion

Loss aversion can be simply defined as “losses loom larger than corresponding gains.” It refers to the fact that people actually prefer to avoid losses rather than acquiring gains. Simply put, people prefer find it better not to lose $50 than receiving the same $50.

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.”